Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/economicsynthesiOOIoririch 


THE  ECONOMIC  SYNTHESIS 


THE   ECONOMIC 
SYNTHESIS 

A  STUDY  OF  THE  LAWS  OF  INCOME 


BY  ACHILLE  LORIA 


TRANSLATED   FROM   THE   ITALIAN    BY 

M.    EDEN    PAUL 


Ex  aliis  alias  reparat  Natura  figuras 

Nee  pcrit  in  tanto  quidquam  mihi  credite  mundo, 

Sed   variat,  faciemque  novat  .  .  . 

.  .  .  summa  autem  omnia  constant. 

Ovid,  Metamorph.^  xv.  pp.  253,  et  seq. 


NEW   YORK 
THE   MACMILLAN   COMPANY 

GEORGE   ALLEN    &   COMPANY,    Ltd. 
1914 


J/i  rights  reserved 


TO 

LIDIA 

MY    YOUNGEST    DAUGHTER 

I    DEDICATE 

MY   LATEST   THOUGHTS 

CONCERNING    ECONOMIC   ENIG.VFAS. 


TABLE   OF    CONTENTS 

PAGE 

Introduction.     Thb  Universal  Data  op  Economic  Science    ,         1 


Chapter    I.     The  Production  of  Income 

Chapter  II.     The  Determination  of  Income 

§  1.  Determination  of  Incojie  by  the  Real 

OR  Objective  Method 
§  2.  Determination  of  Income  by  the  Per 

soNAL  Method  . 
§  3.  Complications  Arising  from  the  Cibcu 

lation  of  Income 

Chapter    III.    The  Forms  op  Income 

§  1.  Fundamental  Forms  of  Income 
§  2.  Undifferentiated  Income 
§  3.  Differentiated  Income 
§  4.  Mixed  Income 
§  5.  Coexistence    and    Succession    of    the 
Forms  of  Income 

Chapter    IV.    The  Kinds  and  Degrees  of  Income 
§  1.  Kinds  of  Income 


8 
35 

35 

50 

67 

75 
75 
79 
91 
114 

11 

130 

130 


§  2.  Degrees  of  Income       .  .  .144 

vii 


viii  Contents 

Chapter  IV. — continued  page 

I  3.  Mutual     Relationships     between     the 
Kinds   and   Degrees   of    Income   and 
THE    Consequences    of    these    Rela- 
tionships .         .  .  .     148 
4.  Influence  of  the  Preceding  Phenomena 

upon  Taxation  .  .  .157 

Chapter   V.     The  Quantity  op  Income      .  .  .182 

§  1.  Absolute  Quantity  of  Income  .     182 

I.  The  Product  of  Associated  Labour     182 
a.  The    Quantity    of    Associated 

Labour  .  .  .     182 

h.  The  Productivity  of  Associated 

Labour  .  .  .185 

(a)  Technical  Productivity  and 
Virtual     Economic     Pro- 
ductivity .  .185 
(j8)  Effective  Productivity — An- 
tagonism between   Product 
AND  Income          .  .193 
II.  The  Wear  of  Technical  Capital    .     211 
HI.  The  Product  of  Isolated  Labour — 
The    Quantity   of   Subsistence  — 
Struggle  between  Subsistence  and 
Income         .         .            .                 .211 
IV.  The   Quantity   of  Saving  —  Saving 

AND  Population  .  .  .     222 

§  2.  The  Rate  of  Income  .  .     239 

§  3.  Quantitative  Tendencies  of  Income       .     245 


Contents 


IX 


PAGE 

Chapter    VI.     The  Distribution  of  Income            .                .  249 
§  1.  Struggle  between  Individual  Incomes  .  249 
§  2.  Result  of   the  Struggle   between    In- 
comes— The   Distribution   op    Income  297 

.     297 


(a)  Static  Conditions    . 

(ft)  Dynamic  Conditions 
Chapter  VII.     Revolutions  op  Income 
Conclusion.    The  Essential  Economic  Law 
Index  of  Authors         ..... 


320 
346 
361 
365 


PREFACE 

TO  THE  ENGLISH  EDITION 


THE  present  work,  which  now  appears  in  a  somewhat  abridged 
form  in  English,  may  be  said  to  sum  up  the  researches  of 
more  than  thirty  years  in  the  domain  of  economic  science, 
and  to  form  the  complement  and  the  theoretic  crown  of  all  my 
earlier  writings.  If,  in  fact,  in  my  previous  works  upon  Land 
Kent  (1879),  upon  Capitalist  Property  (1889),  and  upon  the 
Economic  Constitution  of  To-day  (1899),  I  have  studied  the  specific 
laws  of  the  individual  historic  phases  of  economic  development, 
it  has  been  my  intention  in  this  book  to  study  the  laws  and  the 
regular  recurrences  common  to  all  the  economic  forms  which  have 
hitherto  prevailed ;  to  study,  that  is  to  say,  the  norms  immanent 
in  the  economic  order  per  se,  independently  of  the  different 
manifestations  assumed  by  that  order  in  the  successive  phases 
of  history. 

This  simple  statement  suffices  to  show  that  the  present  book 
is  in  intimate  correspondence  with  the  acquirements  of  the 
economic  thought  of  to-day,  just  as  my  earlier  works  reflected 
the  prior  phases  of  scientific  mentality  in  the  economic  field. 
— If,  in  fact,  in  the  past,  economic  research,  dominated  by  the 
historical  concept,  loved  to  break  up  social  evolution  into  its 
successive  phases,  and  to  throw  the  light  of  theory  separately 
upon  each  of  these,  to-day,  on  the  other  hand,  science  aims  at  the 
attainment  of  a  comprehensive  grasp  of  the  economic  order  in 
the  totality  of  its  integral  manifestations,  and  endeavours  to 
bring  to  light  the  universal  and  eternal  substance  underlying  its 
varying  developments.  In  other  words,  if,  in  the  past,  analysis 
and  the  historical  method  of  treatment  prevailed,  to-day  there 
tend  to  prevail  synthesis  and  pure  science.  Now  the  present 
book  belongs  precisely  to  this  more  modern  and  philosophic 
scheme  of  thought,  without,  however,  endeavouring  to  conform 


xii  Preface 

in  every  respect  to  the  method  commonly  employed  by  those 
authors  who  have  adopted  that  scheme,  for  from  the  work  of 
these  my  book  is  distinguished  by  a  fundamental  difference. 
Whereas,  in  fact,  the  majority  of  the  contemporary  repre- 
sentatives of  pure  economic  science  ignore  historical  research  and 
deduce  their  theories  from  certain  more  or  less  arbitrary  logical 
premises — it  is  my  aim  to  make  use  of  historical  studies  of  the 
precedent  era,  and  to  attain  to  the  economic  synthesis  by  means 
of  the  conscientious  comparison  of  the  economic  forms  hitherto 
traversed,  in  order  to  extract  from  these  the  qidd  common  to 
them  all,  the  essential  element  contained  in  each,  ruling  and 
controlling  all. 

But  in  another  essential  way  my  book  reflects  the  actual  and 
immediate  position  of  economic  science.  If,  in  fact,  we  examine 
the  leading  aim  of  economic  science  in  its  successive  phases,  we 
find  that  in  a  first  period  the  leading  aim  of  economic  investiga- 
tion is  the  rent  of  land,  that  in  a  subsequent  period  it  is  the 
profit  of  capital,  whilst  to-day  the  principal  object  of  economic 
research  is  income  in  its  entirety. — This  is  easy  to  understand : 
for  income,  being  the  integration  of  all  the  specific  rewards  of 
the  various  productive  and  unproductive  factors,  can  be  studied 
only  in  succession  to  the  specific  study  of  these  single  rewards. — 
Now,  if  my  previous  books  dealing  with  land-rent  and  profit 
were  in  correspondence  with  the  economic  thought  of  the  period 
in  which  they  were  published,  the  present  book,  dealing  with 
income,  reflects  very  clearly  indeed  the  actual  position  of 
economic  science  and  is  the  faithful  expression  of  that  position. 

It  will  be  a  very  great  pleasure  to  me  should  the  character- 
istics thus  explained  and  should  the  essential  modernity  of  my 
book  earn  for  it  from  English  readers  the  like  sympathy  with 
which  it  has  been  favoured  by  readers  in  Italy  and  in  France. 
I  shall  feel  myself  fully  compensated  for  my  long  and  arduous 
labours  if  England,  the  teacher  of  the  world  in  economic  science, 
should  recognise  that,  in  this  field  which  she  has  sown  with 
immortal  doctrines,  the  author  has  harvested  some  not  unworthy 
fruit. 

ACHILLE  LOEIA. 

Turin,  September,  191S. 


THE    ECONOMIC    SYNTHESIS 

INTEODUCTION 

THE  UNIVERSAL  DATA  OF  ECONOMIC  SCIENCE 

The  Egyptian  statue,  rigid  in  its  outlines  and  with  the  hands 
attached  to  the  knees,  was  succeeded  by  the  Greek  statue, 
animated  and  ahve.  Similarly  in  the  field  of  abstract  know- 
ledge, the  investigator  begins  with  defective  and  meagre 
generalisations,  concerning  phenomena  considered  in  their 
fixity  ;  from  this  he  proceeds  to  the  more  arduous  study  of  the 
specific  forms  assumed  by  the  phenomena  in  the  course  of 
their  evolution  ;  at  length,  in  a  final  phase,  and  as  the  ultimate 
outcome  of  the  researches  thus  begun,  he  attains  to  the  posi- 
tive study  of  the  synthetic  laws  governing  aU  the  phenomena 
in  their  universal  manifestations.  Thus  to  a  synthesis  static, 
infantile,  impulsive,  and  unscientific  in  character,  there  suc- 
ceeds a  profound  dynamic  analysis  ;  from  this,  and  from  this 
alone,  is  born  a  synthesis  scientific  and  positive  in  character, 
at  once  static  and  dynamic,  which  constitutes  the  crown  and 
the  seal  of  the  investigation. 

The  science  of  mathematics  presents  a  typical  case  of  such 
a  development  as  it  proceeds  from  the  differential  to  the 
integral  calculus.  Apart  from  this,  the  most  notable  example 
of  the  law  under  consideration  is  that  of  mechanics.  By 
the  Greeks,  it  was  only  the  statical  portion  of  this  science 
which  was  studied  ;  and  its  modern  development  dates  from 
the  investigation  of  dynamics,  which  alone  rendered  it  possible 
to  proceed  to  higher  syntheses.  The  otlier  discipHnes  of  natural 
science  exhibit  a  similar  progress.  In  chemistry,  the  fantastic 
primordial  synthesis  was  succeeded  by  a  period  of  positive 
analysis,  from  which  alone,  in  quite  recent  times,  has  arisen 
a  scientific  and  fruitful  synthesis. — ^In  biology,  the  primitive 


2  /^  The  Economic  Synthesis 

and  imperfect  generalisations  concerning  the  whole  world  of 
organisms  gave  place  to  particular  researches  deahng  with 
single  species  of  plants  or  animals,  and  with  the  gradual 
transformations  of  these  ;  to  this  there  succeeded  the  develop- 
ment of  the  science  in  which  Schleiden  and  Schwann  were  able 
to  demonstrate  the  general  identity  in  composition  of  the  tissues 
and  the  analogous  structure  and  development  of  animals  and 
plants  ;  and  the  development  in  which  Gegenbaur  recognised 
the  structural  identity  of  the  terrestial  quadrupeds  with  fish, 
and  that  of  man  with  the  other  vertebrata. 

Similarly,  sociology  begins  with  the  study  of  static  phenomena 
— a  study  not  at  first  very  profound.  John  Stuart  Mill  pointed 
out  that  Comte's  writings  on  social  statics  were  poor  and 
incoherent  in  comparison  with  the  work  of  the  same  author 
in  the  dynamic  and  evolutionary  fields.^  Herbert  Spencer 
frankly  admitted  how  imperfect  and  erroneous  were  his  first 
statical  generaHsations,  and  he  found  it  necessary  to  correct 
them  in  essential  particulars  as  a  result  of  reiterated  study  of 
the  dynamic  laws  of  society  and  of  nature.  ^  But  not  until 
quite  recently  has  there  been  manifest  a  tendency  to  pass  from 
the  dynamic  researches,  which  up  till  now  have  occupied 
almost  the  whole  field  of  sociology,  to  positive  and  more 
elevated  synthetic  studies.^  Hence  in  sociology  also  a  primi- 
tive and  imperfect  statical  stage  gives  place  to  a  period  of 
d3mamical  study,  and  upon  the  foundation  of  this  latter  there 
arises,  in  a  yet  later  stage  of  development,  a  scientific  and 
profound  synthesis. 

Now  such  a  process  characterises  the  study  of  economics. 
Starting  from  more  or  less  inaccurate  generalisations  concern- 
ing phenomena  considered  sub  specie  ceternitatis,  the  investiga- 
tion proceeds  to  the  positive  study  of  the  forms  wliich  the 
economic  order  has  successively  traversed,*  to  attain  at  length 

1  J.  S.  Mill,  Correspondance  avec  A.  Comte,  Paris,  1899,  p.  260. 

2  Spencer,  Autobiography,  London,  1904,  Vol.  II,  p.  154. 

3  Defoiimy,  La  aociologie  positiviste,  A  Comte,  Paris,  1902,  p.  301 ;  Limen- 
tani.  La  preirisione  dei  fatti  sociali,  Turin,  1907,  pp.  320-1. 

*  Patten  blames  the  classical  economists  for  having  confined  their  studies  to 
static  economics  {The  Theory  of  Dynamic  Economics,  Philadelphia,  1892,  p.  37). 
In  actual  fact,  the  studies  of  the  classical  economists  relating  to  universal 
economic  laws  do  not  emerge  from  the  sphere  of  void  abstractions ; 
everything  really  alive  in  their  discussions  is  reached  by  the  positive  analysis 
of  the  economy  of  the  wage  system,  or  refers  exclusively  to  one  historical 
phase  of  social  dynamics.    Hence,  in  political  economy,  scientific  and  positive 


Introdtictioii  3 

to  the  synthesis  of  these  diverse  phenomena,  or  to  the  discovery 
of  a  norm  which  comprehends  them.  ^  Unfortunately,  however, 
it  is  in  the  special  field  of  our  study  that  the  concept  here 
discussed  encounters  at  the  outset,  apart  from  easily  answered 
technical  objections,  a  direct  and  serious  obstacle.  For  many 
writers  contend  that  economic  research  must  be  confined  to 
the  study  of  the  single  concrete  forms  which  the  economic 
order  assumes  in  the  course  of  its  evolution,  without  ever 
attempting  to  proceed  from  these  relative  and  circumscribed 
studies  to  a  unifying  sjnithesis.  Many  years  ago,  John  Stuart 
Mill  pointed  out  that  the  only  elements  which  the  various 
historical  forms  of  the  economic  order  exhibit  in  common  are 
the  most  generahsed  technical  conditions  of  production ; 
whilst  the  laws  of  exchange  and  distribution  are  radically 
different  in  different  economic  epochs. — "  In  the  economic 
field,"  wrote  Marx  a  few  years  later,  "  those  researches  alone 
are  valuable  and  have  a  real  content  which  are  confined  to 
some  specific  form  of  the  relationships  of  production  or  of 
distribution.  One  who  from  such  concrete  researches  aspires 
to  rise  to  a  general  synthesis,  one  who  desires  to  discover  by 
force  a  common  element  in  economic  phenomena  essentially 
distinct  and  belonging  to  successive  social  ages,  will  inevitably 
proceed  to  despoil  these  phenomena  of  everything  which  gives 
to  them  life  and  movement.  The  net  outcome  of  his  laborious 
process  of  reduction  will  be  the  emergence  of  a  residuum  alto- 
gether inanimate,  or  at  best  void  and  exsanguine." ^  Some 
decades  later  similar  considerations  were  urged  by  Stammler, 
writing  from  the  opposite  camp.  This  writer  distinguishes 
technical  or  natural  economy  from  social  economy.  While 
he  admits  that  the  former  is  limited  by  immutable  laws,  he 
contends  that  it  is  essential  for  the  latter  to  have  reference  to 
some  determinate  historical  order,  and  he  denies  the  possi- 
bihty  of  subsuming  under  a  single  unifying  formula  the 
phenomena  of  different  economic  orders.  ^ 

research  begins  with  the  study  of  dynamics  or  with  specific  analysis,  and  from 
these  alone  is  it  possible  to  proceed  to  the  further  stage  in  which  we  attain 
to  the  idea  of  universal  laws. 

^  Fontana,  Critica  sociale,  April  16th,  1903. 

*  Marx,  Einleitung  zu  einer  Kritik  der  politiachen  Oekonomie  (1857)  "  Neue 
Zeit,"  March  7th,  1903.    Cf.  also  Engels,  Anti-Duhring. 

3  Stammler,  Wirtschaft  und  Recht,  Leipzig,  1896,  pp.  188,  191,  224-8, 
298,  et  seq.     Cf,  also  Diehl,  Jahrbucher  fiir  N.E.,  1907,  p.  107. 


4  The  Economic  Synthesis 

However  worthy  of  respectful  consideration  may  be  the 
views  of  these  eminent  thinkers,  the  impartial  student  is  un- 
able to  accept  them  without  critical  examination.  It  has 
already  been  pointed  out  that  if  we  were  to  admit  the  im- 
possibiHty  of  formulating  abstract  laws  appMcable  to  all 
periods  of  development,  it  would  follow  that  biology,  psy- 
chology, and  abstract  sociology  were  all  equally  impossible.  It 
may  be  added  that  Marx  was  himself  the  first  to  give  the  lie 
to  his  own  thesis,  by  the  enunciation  of  universal  laws,  or 
formulas  appUcable  to  all  times  and  to  all  nations.  Take 
Marx's  own  formula,  that  every  period  of  social  Hfe  contains 
the  germs  of  its  own  dissolution  ;  his  principle  that  the  pre- 
vailing mode  of  production  forms  the  basis  upon  which  are 
built  up,  in  any  historical  epoch,  the  system  of  moral,  legal, 
and  poHtical  institutions,  and  the  prevailing  ideas  of  that  epoch  ; 
or,  again,  his  principle  that  the  whole  history  of  mankind  is  the 
outcome  of  the  class  struggle — ^what  are  these  but  so  manj^ 
general  laws  tending  to  subsume  the  dispersed  phenomena  of 
history  under  a  single  master-formula  ?i  The  truth  is,  as 
Bernstein  well  expresses  it,  that  Marx's  study  of  economical 
theory  is  concerned  with  something  more  than  the  structure 
of  modern  society  or  the  economy  of  the  wage  system  ;  we 
find  here  and  again  in  his  work  more  or  less  definite  indications 
of  a  pro  founder  and  more  far-reaching  investigation,  concerned 
with  the  general  theory  of  human  society,  and  with  the  dis- 
covery of  characteristics  common  to  all  the  historical  phases 
through  which  that  society  has  passed. ^  The  special  task  of 
the  science  of  our  own  daj^  is  to  effect  a  fuller  development  of 
this  second  and  vaster  group  of  investigations.  Nor  does  the 
fact  that  the  attempts  hitherto  made  in  this  direction  amount 
to  mere  logomachies  justify  the  view  that  these  loftier 
researches  are  impossible  ;  for  hitherto  the  ventures  in  this 
field  have  been  mere  logical  speculations  founded  upon  abstract 
premises  and  devoid  of  that  positive  basis  which  is  rendered 
possible  only  by  the  effective  comparison  of  successive  economic 
orders.  3 

1  De  Greef,  La  sociologie  dconomiqtte,  Paris,  1904,  pp.  129. 

*  Bernstein,  Die  Vorausaetzungen  des  Sozialismus,  Stuttgart,  1899,  p.  2, 
et  seq. 

3  Effertz  (Arbeit  und  Boden,  Berlin,  1889,  pp.  93,  144-5,  etc.)  declares  with 
reason  that  the  essential  task  of  the  economic  science  of  our  day  is  the  study 


Introduction  5 

The  views  of  the  most  authoritative  opponents  of  evolu- 
tionist relativism  cannot  countervail  the  necessity  that  from 
the  analytical  study  of  the  single  concrete  forms  of  economic 
relationships  we  should  proceed  to  a  synthesis  of  their  common 
and  universal  features.  This  synthesis  must  be  one  which 
reduces  to  a  common  denominator  the  economic  forms  hitherto 
partially  investigated,  one  which  searches  out  the  insignem 
generis  Jiutnani  similitudinem,  which  discovers  the  kernel 
common  to  all  the  phenomena,  and  represents  these  as  immedi- 
ate or  mediate  expressions,  quantitatively  diverse,  of  a  unique 
and  essential  element.  Such  research  of  a  higher  order  con- 
stitutes the  necessary  integration  and  the  most  essential  crown 
of  that  new  and  noble  field  of  study  which  is  known  by  the 
name  of  social  morphology.  This  study,  which  finds  its  proper 
base  of  operations  in  the  analysis  of  single  successive  economic 
forms,  would  yet  inevitably  remain  imperfect  and  discordant 
if  it  did  not  proceed  to  the  synthesis  of  the  specific  forms  that 
have  been  studied,  or  if  it  failed  to  divine  beneath  the  most 
multiplex  and  varied  types  of  finished  beauty,  the  primitive 
and  indifferent  brutahty  of  the  block  of  granite  from  which 
these  have  all  been  sculptured. 

In  the  year  1889,  in  a  short  essay  upon  the  importance  of 
history  in  economics,  I  called  attention  to  the  existence  of 
and  to  the  necessity  for  this  field  of  higher  investigation. 
"  Even  though  it  be  perfectly  true,"  I  then  wrote,  "  that  those 
generahsations  which  economists  have  dignified  with  the  name 
of  laws  do  not  deserve  that  name,  inasmuch  as  they  are  nothing 
more  than  more  or  less  perfect  abstractions  from  transitory 
phenomena,  we  must  not  for  this  reason  deny  to  economic 
science  the  possibifity  of  attaining  to  the  discovery  of  a  true 
general  law,  a  law  of  laws,  a  regulative  norm  which  shall  take 
precedence  of  all  such  abstractions — ^a  generaUsation  which 
shall  subsume  the  common  elements  in  the  economic  pheno- 
mena of  all  times. — ^The  laws  of  the  classical  economy  are 

of  those  laws  which  regulate  the  economic  order  independently  of  its  his- 
torical forms  ;  and  he  reproaches  Marx  and  all  other  economists,  with  the 
exception  of  Rodbertus,  on  the  ground  that  hitherto  they  have  confined 
themselves  to  the  study  of  the  specific  laws  of  individual  social  phases.  But 
Effertz  forgets  that  it  is  only  upon  a  foundation  of  such  analytical  studies 
that  it  is  possible  to  proceed,  in  due  course,  to  the  formulation  of  universal 
economic  laws. 


6  The  Economic  Synthesis 

nothing  but  the  essential  theory  of  the  economy  of  the  wage 
system ;  the  analysis  of  medieval,  classical,  or  primitive 
economic  phenomena  will  lead  us,  perhaps  at  the  expenditure 
of  much  labour,  to  the  discovery  of  an  essential  theory  of  the 
phenomena  of  those  epochs.  .  .  .  Now,  when  a  profound  study 
of  successive  economic  relationships  has  enabled  us  to  discover 
the  transitory  laws  characterising  the  respective  epochs,  it  only 
remains  to  institute  a  comparison  between  the  various  laws  in 
order  to  bring  to  light  the  general  law  which  governs  them  all. 
This  will  be  the  true  economic  law,  immutable,^  independent 
of  space  and  time,  and  therefore  fulfilling  all  the  requirements 
of  a  scientific  law.  .  .  .  The  discovery  of  a  general  law  from 
these  transitory  laws,  of  an  economic  law,  that  is  to  say,  is 
thus  the  cHmax  of  scientific  research  in  the  economic  field."  ^ 
It  was  impossible  for  me  to  devote  myself  to  this  more 
exalted  study  until  I  had  completed  the  analytical  investiga- 
tion of  the  separate  social  constitutions.  It  was  my  endeavour 
to  throw  light  on  these  matters  :  first  of  all,  in  their  two  chief 
forms,  according  as  there  does  or  does  not  exist  free  land^; 
next,  in  the  disparate  and  multiplex  subordinate  forms  they 
have  successively  assumed*;  and,  finally,  in  the  more  in- 
teresting and  more  highly  evolved  form  which  now  pre- 
vails.^ Having  done  my  best  to  bring  this  first  series 
of  investigations  to  a  conclusion,  the  time  has  at  length 
arrived  to  pass  on  to  a  higher  level,  and  to  study,  no  longer 
the  phenomena  or  the  specific  laws  of  the  individual  economic 
forms  which  appear  successively  in  history;  but  to  study 
the  omnipresent  lineaments,  the  general  and  sovereign  laws 
which  discipline  and  regulate  all  of  these.  Now  that  we  have 
photographed  the  successive  social  stages  and  have  repro- 
duced their  succession  with  the  aid  of  the  cinematograph,  we 
have  to  superpose  these  images  in  order  to  extract  their  com- 
mon type  ;  we  have  to  initiate  that  analysin  situs  which  awaits 

1  It  must  be  understood  that  such  immutability  is  eminently  relative. 
We  have  to  do  with  a  law  derived  from  a  synthesis  of  all  the  forms  past  and 
present,  and  for  this  very  reason  it  cannot  possess  an  absolute  value  in  respect 
to  the  future. 

2  La  storia  nella  scienza  economica,  "  Giomale  degli  economisti,"  March- 
June,  1889. 

'  Analisi  della  proprietd  cajntaliata  (1889),  Vol.  I. 

*  Analisi,  Vol.  II. 

*  La  costituzione  economica  odierna,  1898. 


hitrodtiction  7 

its  Riemaim,  to  study  the  continuous  amorphous  substratum 
common  to  all  the  economic  forms  and  categories  previously 
considered  ;  to  write,  in  a  word,  were  it  only  as  a  preliminary 
sketch,  the  supreme  drama  whose  subject  matter  is  man, 
whose  scene  is  the  world,  and  whose  time  is  eternity. — However 
difficult  this  investigation  may  be,  its  pursuit  is  at  the  present 
moment  the  most  essential  object  of  economic  study,  and  it  is 
to  this  that  we  invite  the  benevolent  attention  of  the  dis- 
passionate truthseeker. 


CHAPTER  I 

THE  PRODUCTION  OF  INCOME 

In  the  conditions  of  exuberant  productivity  of  the  soil  which 
characterised  the  dawn  of  human  society,  individual  labour, 
employed  for  a  time  varying  according  to  the  vigour,  the  in- 
clination, and  the  technique  of  the  labourer,  and  employed 
either  without  technical  capital  or  with  a  cellular  technical 
capital,^  furnishes  produce  largely  exceeding  the  subsistence 
required  by  the  producer  and  his  family.  This  is  the  economic 
phase  of  spade-culture,  in  the  hands  of  isolated  labourers 
without  ploughs  or  domesticated  animals,  which  is  none  the 
less  able  to  yield  a  notable  product.^  Thus,  it  is  recorded  that 
in  New  Spain,  in  the  days  of  Humboldt,  one  hundred  square 
metres  of  land,  cultivated  with  the  aid  of  very  little  capital 
or  none  at  all,  gave  an  annual  yield  of  bananas  containing 
more  than  two  thousand  kilograms  of  nutritive  substances, 
that  is  to  say  a  yield  largely  in  excess  of  the  individual  re- 
quirements of  the  worker  for  his  subsistence.  Even  to-day 
the  indigens  of  New  Guinea  and  those  of  German  Africa,  and 
the  settlers  of  Santa  Fe  or  Cordoba  in  Argentina,  produce  by 
isolated  labour,  and  with  very  moderate  exertion,  much  more 
than  they  need  for  their  own  consumption .'' 

In  such  conditions,  the  producers,  inasmuch  as  by  isolated 
labour  they  obtain  a  subsistence,  have  no  motive  to  associate 

^  In  the  following  investigations  the  author  will  follow  a  different  course  from 
that  adopted  in  his  earlier  works,  and  will  admit  that  labour  is  always  employed 
in  association  with  technical  capital,  thus  excluding  the  hypothesis  of  pure  labour, 
which  is  met  with  only  in  the  very  earUest  phases  of  economic  development,  so 
that  considerations  relating  thereto  are  hardly  applicable  in  a  study  of  universal 
and  constant  economic  phenomena. 

^  Hahn,  Die  Haustliiere,  in  ihre  Beziehungen  ziir  WirtscJiaft  des  Menschen, 
Leipzig,  1896,  pp.  33,  et  seq. 

^  Humboldt,  Essai  politique  sur  le  royaume  de  la  NouvcUe  Espagne,  Paris,  1811, 
III,  pp.  28-9. — [T?ie  Colonial  Policy  oj  Germany'^,  in  the  "  Russkaia  Mussl," 
August,  1906,  p.  72. 

8 


The  Production  of  Income  g 

their  labour,  since  this  would  involve  more  or  less  limitation 
of  their  independence  ;  in  other  words,  the  free  association  of 
labour  is  impossible. — On  the  other  hand,  the  producers, 
obtaining  by  means  of  their  isolated  labour  something  more 
than  a  subsistence,  are  economically  in  so  strong  a  position 
that  they  can  set  at  defiance  any  authoritative  attempts  to 
force  upon  them  the  association  of  their  labour  ;  in  other 
words,  the  coercive  association  of  labour  is  impossible.  In 
such  conditions,  therefore,  labour,  for  the  simple  reason  that 
it  produces  a  subsistence,  cannot  be  freely  associated  ;  while, 
for  the  simple  reason  that  it  produces  more  than  a  subsistence, 
it  cannot  be  coercively  associated  ;  therefore  it  must  of 
necessity  remain  isolated.  In  other  words,  isolated  labour 
constitutes  in  such  conditions  the  normal  and  lasting  founda- 
tion of  production  and  of  economic  life. 

As  the  population  increases,  however,  and  the  need  thus 
arises  to  undertake  the  cultivation  of  land  less  and  less  fertile, 
isolated  labour  gives  an  ever  smaller  yield,  and  hence  pro- 
vides a  continually  slighter  excess  over  and  above  what  the 
producer  requires  for  his  subsistence.  For  such  a  dechne  in 
yield,  the  producer  may  for  a  time  compensate  in  one  of 
several  ways.  He  may  extend  his  hours  of  work  beyond  the 
normal  limits  ;  he  may  perfect  his  technical  equipment  ;  he 
may  limit  his  production  to  a  single  commodity,  rendering  his 
work  more  continuous  and  more  productive,  and  may  then 
procure  the  other  articles  of  consumption  that  he  needs  from 
other  producers  who  have  specialised  along  other  lines.  To 
put  the  matter  in  another  way,  to  obviate  a  lessened  yield, 
or  to  produce  something  more  than  the  worker's  subsistence, 
it  is  necessary  that  there  should,  to  a  certain  extent,  arise  the 
complex  association  of  labour  ;  that  is  to  say,  each  producer 
must  confine  his  energies  to  the  production  of  a  single  com- 
modity, while  each  must  receive  a  portion  of  the  produce  of 
the  work  of  others.  This  exchange  of  products  may  either 
result  from  spontaneous  individual  initiative,  or  it  may  be 
imposed  from  without  by  some  regulative  authority.  In  the 
latter  case  (which  in  ancient  times  was  the  commoner),  such 
a  regulative  authority  may  itself  appropriate  the  produce 
collected  from  the  respective  undertakings  and  allot  this 
produce  to  individuals  in  predetermined  rations.     Such  was 


lo  The  Economic  Synthesis 

the  practice  among  the  ancient  Greeks,  among  the  Suevi  as 
described  by  Caesar,  and  in  precolonial  Peru  ;  and  such  is  the 
practice  at  the  present  day  among  the  African  Marea.  But 
when  the  exercise  of  central  authority  is  limited  to  the  assign- 
ment to  each  individual  of  some  particular  field  of  production, 
and  equally  when  such  speciahsation  is  the  outcome  of  in- 
dividual initiative,  the  commodities  produced  by  such  isolated 
individuals  cannot  be  distributed  among  these  in  any  other 
way  than  by  means  of  exchange.  Thus,  in  the  absence  of  a 
despotic  intervention  on  the  part  of  a  centraHsed  authority, 
the  complex  association  of  labour,  or  the  speciahsation  of  pro- 
duction, has  as  its  correlative  and  as  its  necessary  consequence 
a  system  of  exchange. 

How  is  the  exchange  between  dissociated  producers  to  be 
regulated  ?  In  other  words,  how  are  they  to  decide  upon  the 
relative  values  of  their  products  ?  We  have  to  distinguish 
several  cases. 

1.  If  the  supply  of  the  various  products  is  unrestricted,  and 
if  the  quantity  of  the  products  offered  in  exchange  is  Hkewise 
unrestricted,  the  value  of  the  various  commodities  is  that  which 
is  determined  by  the  reciprocal  absorption  of  the  quantities 
produced.  Now,  in  the  case  where  there  exist  two  products 
only,  the  value  which  is  established  by  this  process  is  evidently 
unique  and  determinate  ;  for  it  is  clear  that  if  one  individual 
produces  100  A  and  another  produces  120  B,  the  relation  of 
value  can  only  be  that  100  A=120  B.^  But  if  we  assume,  in 
conformity  with  the  actual  facts  of  experience,  the  coexistence 
of  more  than  two  products,  it  would  seem  at  first  sight  as  if 
the  value  must  in  such  conditions  be  indeterminate  ;  for, 
supposing  the  quantities  produced  to  remain  constant,  and 
therewith  constant  also  the  supply  of  the  respective  commodi- 
ties, changes  may  continually  occur  in  their  redistribution 
among  the  various  buyers,  with  consequent  changes  in  value 
among  the  various  products.  If,  for  example,  we  suppose  that 
there  are  three  products,  100  A,  105  B,  90  C,  they  may  have  the 

^  This,  the  simplest  of  all  cases,  is  the  only  one  to  which  the  theory  of 
value  in  its  oldest  forms  refers.  Two  famous  theories,  the  quantitative  theory 
of  money  and  the  theory  of  the  wages  fund,  revolve  round  the  presupposition, 
expressed  or  implied,  of  a  two-sided  unrestricted  supply,  and  they  deduce 
from  this  a  value  equal  to  the  quotient  of  the  two  quantities  produced.  Natur- 
ally, if  the  premises  are  abandoned  both  theories  are  invalid. 


The  Production  of  Income  1 1 

following  values,  which  absorb  the  total  amounts  of  the  re- 
spective commodities  : 

40  A=60  B 
60A=60C 
45B=30C 

But  it  may  also  happen  that  the  producers  of  A  demand  a 
smaller  quantity  of  B,  offering  in  return  a  smaller  quantity  of 
A  ;  and  this  may  give  rise,  although  the  total  quantity  of  A 
produced  remains  constant,  to  a  relative  increase  in  the  quantity 
of  A  that  is  offered  in  exchange  for  C. — ^There  results,  therefore, 
a  different  value,  not  only  as  between  A  and  B,  but  also  as 
between  A  and  C  and  as  between  B  and  C. — ^Inasmuch  as  the 
offers  of  A  as  against  B  may  vary  to  an  infinite  degree,  it 
would  seem  that  in  the  stated  conditions  an  infinite  variation 
of  values  is  possible. 

A  simple  consideration  will,  however,  show  that  this  is 
not  the  case.  For,  as  a  result  of  the  change  in  the  offer  of  A 
for  B,  it  does  not  only  follow  that  there  must  be  a  change  in 
the  relative  values  of  all  the  products,  but  it  also  follows  that 
all  these  values  vary  correlatively — or  that  the  new  value 
which  is  estabHshed  between  B  and  C  must  be  the  exact 
resultant  of  the  two  new  values  A— B  and  B— C.  If,  for 
example,  there  be  offered  30  A  for  50  B,  there  will  remain 
70  A  on  offer  for  C  and  55  B  on  offer  for  C.  Now  the  new 
value  established  as  between  A  and  C  and  as  between  B  and  C 
is  rigorously  determined  by  the  following  equations  : — 

30A=50B 

70A=(90-a:)C 
55  B=x  C 

From  this  it  foUows  that,  since  70  A=  116-66  B, 

90~a;:a;=  116-66:  55 
a;=28 
70A=62C 
55B=:28C. 

Thus  the  new  equilibrium  between  A  and  B  becomes  pos- 
sible only  on  condition  that  it  is  possible  to  determine  new 


12  The  Economic  Synthesis 

values  as  between  A  and  C  and  as  between  B  and  C.  If  it 
should  happen  that  the  desires  and  the  tastes  of  the  consumers 
are  such  as  to  render  the  determination  of  these  particular 
values  impossible,  the  indicated  variation  in  the  relationships 
of  exchange  as  between  A  and  B  will  prove  unattainable. 
Hence  the  possibihty  of  this  variation  in  the  relationships  of 
exchange  as  between  A  and  B  is  subordinated  to  a  condition 
whose  fulfilment  is  far  from  probable. 

Indeed,  the  fulfilment  of  such  a  condition  is  more  than 
improbable,  for  it  is  actually  impossible.  If  the  producers  of 
A  offer  a  smaller  quantity  of  their  commodity,  in  order  to 
obtain  in  exchange  a  smaller  quantity  of  B,  there  results  an 
increase  in  the  quantity  both  of  A  and  of  B  which  is  available 
and  on  offer  as  against  C.  If  there  is  an  increase  in  the  quantity 
of  A  offered  as  against  C,  this  may  evidently  be  the  outcome 
simply  of  the  intention  to  obtain  a  larger  quantity  of  C,  and 
thence  there  necessarily  follows  an  increase  in  the  quantity 
of  C  offered  as  against  A.  No  less  necessarily  there  follows 
a  correlative  diminution  in  the  quantity  of  C  elsewhere  avail- 
able, available,  that  is  to  say,  in  offer  as  against  B.  Hence, 
while  the  quantity  of  B  offered  for  C  incrmses,  the  quantity 
of  C  offered  for  B  diminishes.  Now  it  is  rationally  impossible 
that  there  should  be  offered  a  larger  quantity  of  the  product 
B  in  order  to  obtain  in  exchange  a  smaller  quantity  of  the 
product  C,  ^^'hen  the  buyer  is  weU  aware  that  the  whole 
quantity  of  C  is  necessarily  offered,  whatever  may  be  the  actual 
quantity  given  in  exchange,  or  without  any  increase  in  its 
unitary  value. — ^Thus  the  producers  of  B  will  offer,  not  a  larger 
quantity  of  their  product  than  at  first,  but  a  lesser  quantity  ; 
whence  there  will  remain  at  their  disposal  a  certain  quantity 
of  B,  which  wiU  be  necessarily  offered  as  against  A,  thereby 
rendering  impossible  the  value  just  established.  Thus,  in 
our  example,  the  result  of  the  mutation  of  the  system  of 
initial  values  would  be,  that  the  producers  of  B,  who  at  first 
gave  45  B  to  obtain  30  C,  would  now  give  65  B  to  obtain  28  C  ; 
which  is  absurd,  for  evidently  the  producers  of  B,  kno^dng 
that  they  can  obtain  28  C  without  any  increase  of  unitary 
value,  will  give,  to  obtain  this  quantity  of  C,  not  more  than 
45  B,  but  less  ;  hence  there  wiU  remain  available  more 
than    10   B,   which   will   afresh   be   on    offer   as   against   a 


The  Production  of  Income  1(3 

new  quantity  of  A,  thus  rendering  impossible  the  value 
30  A=50  B. 

If,  in  the  place  of  the  producers  of  A,  it  is  the  producers  of 
B  who  obtain  a  larger  quantity  of  C,  by  giving  in  exchange 
a  larger  quantity  of  their  own  product,  there  recurs  the  before- 
mentioned  incongruence  in  the  relationships  between  A  and 
C  ;  for,  if  a  larger  quantity  of  C  is  exchanged  against|  B, 
there  remains  a  lesser  quantity  to  exchange  as  against  A  ; 
for  which  the  producers  of  A  would  be  offering  a  larger  quantity 
of  their  product  in  order  to  obtain  a  smaller  quantity  of  C  ; 
which  is  absurd.  To  put  the  matter  in  general  terms,  if  there 
is  a  diminution  in  the  quantity  offered  of  A  as  against  B,  and 
hence  of  that  of  B  as  against  A,  there  must  be  an  increased 
quantity  both  of  A  and  B  remaining  available,  and  on  offer 
as  against  C.  But  inasmuch  as  the  quantity  of  C  is  constant, 
and  the  whole  amount  is  necessarily  on  offer,  it  is  impossible 
that  the  producers  of  A  and  B  should  offer  a  larger  quantity 
of  their  respective  products  in  exchange  for  C  ;  from  which 
it  results  that  the  portions  of  A  and  B  temporarily  withdrawn 
from  the  mutual  exchange  of  these  two  products,  will  neces- 
sarily once  more  be  on  offer  one  against  the  other. 

Therefore,  given  a  pluraHty  of  commodities,  it  is  necessary 
that  the  value  as  between  any  two  commodities  should  be 
equivalent  to  the  relationship  between  their  values  measured 
in  terms  of  a  third  commodity  ;  and  it  is  further  necessary 
to  the  maintenance  of  these  values  that  the  total  quantity  of 
the  commodities  produced  should  be  effectively  sold.  Now 
there  is  only  one  system  of  values  which  satisfies  both  these 
conditions ;  for  every  alteration  in  value  between  two 
commodities  diminishes  (or  increases)  the  quantity  of  them 
reciprocally  exchanged,  and  hence  increases  (or  diminishes) 
the  quantity  of  them  which  can  be  exchanged  for  a  third  com- 
modity presumed  to  be  constant  in  quantity.  Hence  it  results 
that  an  increased  (or  diminished)  quantity  of  the  two  first 
commodities  comes  to  be  on  offer  to  obtain  a  constant  quantity 
of  the  third.  But  this  is  absurd,  because  the  producers  of  the 
first  and  second  will  never  be  wilHng  to  give  a  larger  quantity 
of  their  own  commodities  in  order  to  obtain  a  constant  quantity 
of  the  third  commodity  necessarily  offered  in  exchange  ;  or, 
conversely,  the  producer  of  the  third  commodity  will  not 


14  The  Economic  Synthesis 

give  a  constant  quantity  of  this  in  order  to  obtain  in  exchange 
a  lesser  quantity  of  the  two  others.  Hence  any  mutation  of 
initial  value  is  impossible  so  long  as  the  quantity  produced 
of  the  various  commodities  remains  constant.  It  follows,  where 
there  are  several  commodities,  that  the  value  of  these  is  always 
that  which  is  determined  by  the  reciprocal  absorption  of  the 
quantities  produced,  and  this  value  is  unique  and  determinate. 

2.  If  the  supply  of  a  product  is  unrestricted,  or  if  the  whole 
quantity  produced  must  be  sold,  whilst  the  demand  for  it  is 
restricted,  or  the  quantity  of  the  product  available  in  exchange 
can  be  restricted,  there  is  estabhshed  that  value  in  accordance 
with  which  the  whole  available  quantity  of  the  former  product, 
neither  more  nor  less,  finds  purchasers. 

Thus,  let  us  suppose  that  there  are  in  the  market  1000 
units  of  A  and  1000  units  of  B,  and  that 


when  the  val 

ue  of 

there  will  be  sold 

in  exchange  for 

1  measure  of  A  = 

measures  of  A 

measures  of  B 

0  measures 

of  B 

20 

200 

1       ,. 

j> 

500 

500 

0-6    „ 

jj 

1000 

600 

0-3   „ 

» 

1600 

450 

0-2   „ 

» 

2200 

440 

it  is  evident  that  the  only  value  which  satisfies  the  conditions 
supposed  is  that  in  which  one  measure  of  A=0-6  measures  of 
B,  because,  at  this  valuation,  there  can  be  sold  precisely  1000 
measures  of  A,  or  the  whole  quantity  produced  ;  whereas  at 
a  higher  valuation  the  quantity  sold  is  less  than  the  quantity 
produced,  which  is  excluded  by  hypothesis  ;  whilst  at  a  lower 
valuation  the  quantity  sold  is  greater  than  the  quantity  pro- 
duced, which  is  absurd. 

If,  however,  it  is  the  intention  of  the  buyers,  or  if  the  buyers 
have  agreed,  not  to  increase  their  demand  for  the  product  even 
should  its  value  fall  below  the  level  thus  estabHshed,  and  if  in 
addition  they  combine  to  exclude  the  new  buyers  whom  the 
fall  in  price  of  the  product  cannot  fail  to  attract,  the  value 
may  fall  below  the  point  at  which  it  would  be  estabhshed  in 
conditions  of  free  competition  among  the  buyers.  But  inas- 
much as  the  number  of  would-be  buyers  increases  with  the 
decline  in  the  value  of  the  product,  there  arrives  sooner  or  later 


The  Prodtiction  of  Incoine  15 

the  moment  in  which  the  number  of  new  buyers  brought 
into  the  field  by  the  decHne  in  value  is  so  great,  that  it  is  no 
longer  possible  to  exclude  them  ;  or  to  exclude  them  may 
involve  an  expense  exceeding  the  advantage  that  would  be 
derived  from  their  exclusion.  Now  it  is  evident  that  the 
value  can  never  descend  to  this  level.  In  other  words,  the 
value  is  estabUshed  at  that  point  below  which  an  exclusion  of 
new  buyers  is  anti -economic  or  impossible. 

3.  If  the  supply  of  a  product  is  restricted  while  the  demand 
for  it  is  unrestricted,  or  if  the  whole  quantity  produced  of 
another  commodity  must  in  any  case  be  devoted  to  the  acquisi- 
tion of  the  former,  that  value  is  estabUshed  at  which  the  whole 
quantity  produced  of  the  second  commodity  is  effectively 
disposed  of  in  order  to  obtain  the  first.  Let  us  suppose,  for 
example,  that  there  are  in  the  market  1000  units  of  A  and 
1000  units  of  B,  and  that 

when  the  value  of  there  will  be  disposed    obtaining  in  exchange 

>'  1  measure  of  A  =  of  for  A  measures  of  B  measures  of  A 

10  measures  of  B  200  20 

8       „               „  800  100 

6       „              „  1000  200 

4       „               „  1200  300 

1       „               „  400  400 

it  is  evident  that  the  only  value  which  satisfies  all  the  con- 
ditions supposed  is  that  in  which  one  measure  of  A=5  mea- 
sures of  B,  because  this  is  the  value  at  which  all  the  measures 
of  B  produced  (1000)  are  disposed  of  in  exchange  for  A  ;  where- 
as at  the  higher  value  8  there  would  be  disposed  of  in  exchange 
for  A  a  lesser  quantity  of  B  than  the  total  quantity  produced, 
which  is  excluded  by  hypothesis,  and  at  the  lower  value  4 
there  would  be  disposed  of  in  exchange  for  A  a  quantity  of  B 
greater  than  the  total  quantity  produced,  which  is  absurd. 

If,  always  supposing  the  supply  to  be  restricted,  the 
demand  is  not  only  unrestricted,  but  capable  of  indefinite 
increase,  there  is  estabHshed  that  value  at  which  the  quantity 
of  this  product  disposed  of  in  exchange  for  the  product  offered 
reaches  the  maximum  ;  or,  in  the  example  given,  there  is 
established  the  value  1  A=4  B,  in  accordance  with  which  the 
product  A  obtains  in  exchange  1200  B,  which  is  larger  than 


1 6  The  Economic  Synthesis 

the  quantity  of  B  that  could  be  obtained  on  the  basis  of  any 
other  valuation.  In  fact,  leaving  out  of  account,  for  the  sake 
of  simphcity,  the  cost  of  production  of  the  commodity  A  which 
is  given  in  exchange,  this  is  the  value  which  gives  the  maximum 
return  to  the  producers  of  A,  and  this  is  the  one  necessarily 
preferred  by  them  ;  nor  have  the  producers  of  B  any  way  of 
resisting  this,  inasmuch  as  to  do  so  would  be  to  restrict  the 
supply  of  B,  which  by  hypothesis  is  impossible  to  them. 

If  the  supply  of  a  product  can  be  restricted  only  to  a  certain 
figure,  and  such  a  restriction  of  the  supply  increases  the  gain 
of  the  producers,  there  is  estabhshed  the  particular  value  which 
effects  the  sale  of  that  particular  quantity  of  the  product. — 
Tlius,  in  the  first  example,  let  us  suppose  that  the  supply  of  A 
can  be  restricted  to  800  measures,  but  not  below  this  figure. 
In  this  case,  if  the  value  which  effects  the  sale  of  800  measures 
of  A  is  1A=0-8B,  this  value  brings  in  return  640  B,  or  more 
than  would  be  obtained  by  seUing  the  whole  1000  A.  This, 
then,  is  the  value  that  wiU  be  established.^ 

4.  If  there  are  various  products,  the  supply  of  which  is 
restricted,  while  the  demand  for  them  is  capable  of  indefinite 
increase,  the  relative  value  of  any  two  of  these  is  equal  to  the 
mean  of  their  relative  values  of  maximum  gain ;  or,  to  put 
the  matter  in  more  precise  terms,  it  is  equal  to  half  the  sum 
of  the  quantities  of  the  two  products  sold  at  the  respective 
relative  values  of  maximum  gain.  2 

Thus,  where  there  are  any  two  products,  if  there  be  an  un- 
restricted supply,  bilateral  or  unilateral,  as  the  case  may  be, 
the  value  which  is  estabhshed  is  that  which  effects  the  mutual 
absorption,  bilateral  or  unilateral,  as  the  case  may  be,  of  the 
quantity  produced  ;  if  there  is  a  restriction  of  supply,  uni- 
lateral or  bilateral,  as  the  case  may  be,  the  value  which  is 
estabhshed  is  that  of  maximum  gain,  or  the  mean  of  the  two 
values  of  maximum  gain.     But  the  values  thus  established 

*  Another  and  intermediate  case  is  that  in  which,  whilst  the  demand  is 
capable  of  indefinite  increase,  the  supply  is  capable  of  restriction  by  some 
only  of  the  producers.  In  this  case  there  will  be  established  the  value  which 
gives  the  maximum  gain  to  those  producers  who  can  restrict  the  supply,  or 
that  value  which  (putting  the  cost  of  production  out  of  consideration)  gives 
the  maximum  integral  value  to  the  quantity  they  can  sell,  and  which  is  equal 
to  the  total  quantity  that  can  be  sold  at  the  price  thus  fixed,  less  the  quantity, 
which  is  constant,  sold  by  the  other  producers.  Cf .  Forscheimer,  Theoretieches 
um  unvollstdndiges  Monopol,  "  Jahrbuch  fiir  Gesetzg.,"  1908,  pp.  3,  et  seq. 

*  Loria>  II  vcUore  delta  moneta,  2nd  edition,  Turin,  1902,  pp.  58-60. 


The  Production  of  Income  1 7 

can  be  realised  only  on  condition  that  their  sum-total  does 
not  exceed  the  value  of  the  total  quantity  of  products  avail- 
able in  exchange  for  the  products  to  be  purchased  ;  for,  if 
it  were  otherwise,  it  would  be  necessary  to  effect  a  propor- 
tional reduction  of  the  respective  values  until  their  total  value 
became  equivalent  to  the  total  quantity  of  the  products  con- 
stituting the  demand.^ 

Such  is  the  current  or  immediate  value  which  is  established 
between  the  products  ;  and  if  among  the  respective  producers 
there  does  not  exist  free  competition,  this  value  is  normal  and 
definitive. — ^If,  however,  there  is  open  competition  among  the 
producers,  the  value  may  be  estabhshed  at  this  level  for  the 
time  being,  but  such  a  value  cannot  be  a  lasting  one,  cannot 
become  normal,  unless  it  is  proportional  to  the  cost  of  pro- 
duction of  the  various  commodities.  If  the  value  of  the  pro- 
ducts is  out  of  relation  with  their  respective  costs  of  production, 
those  producers  who  obtain  a  value  less  than  the  cost  of  pro- 
duction will  transfer  their  energies  to  the  production  of  com- 
modities which  obtain  a  value  superior  to  that  cost.  Hence 
the  supply  of  these  latter  products  increases  while  the  supply 
of  the  former  products  diminishes  ;  whereupon  the  value  of 
the  former  rises  in  proportion  to  that  of  the  latter,  and  this 
process  continues  until  the  quantities  of  the  various  products 
which  are  exchanged  for  one  another  vary  inversely  as  their 
cost.  At  this  point,  and  at  this  point  alone,  the  current  value 
becomes  normal.  This  does  not  exclude  the  possibility  that 
in  place  of  such  a  gradual  change  in  the  supply  of  the  various 
commodities,  and  a  general  correlative  change  in  their  respec- 
tive values,  there  may  be  a  more  abrupt  and  decisive  change 
which  speedily  renders  the  value  equivalent  to  the  cost  of 
production,  or  estabhshes  a  normal  value.  For,  if  there  exists 
free  competition,  it  is  against  the  producer's  interest  to  raise 
the  value  of  his  commodity  above  the  cost  of  production, 

^  Some  writers  affirm  that  the  value  of  each  product  depends  upon  the 
demand  for  it,  and  that  this  in  its  turn  depends  upon  the  value  of  all  the 
other  products  consumed  by  the  buyer.  If  this  were  true,  the  value  of  one 
product  would  be  determined  by  the  value  of  a  number  of  other  products  ; 
in  other  words,  one  value  would  depend  upon  another  value  in  an  endless 
circle.  The  truth  is  that  in  the  case  of  each  product  its  value  is  determined 
independently  of  the  values  that  are  established  for  other  products  ;  but 
the  integral  value  of  all  the  products  must  not  exceed  the  available  wealth  of 
their  buyers.  If  it  does  exceed  this,  it  is  necessary  that  there  should  be  effected 
a  proportional  reduction  in  the  value  of  all  the  products. 

C 


1 8  The  Economic  Synthesis 

since  this  would  invite  the  entry  into  the  market  of  rival 
sellers,  and  would  consequently  depress  the  value  of  his  pro- 
duct to  a  ruinous  extent  ;  for  this  reason,  even  if  it  is  within 
his  power  sensibly  to  Hmit  the  supply  of  his  commodity,  he 
will  prefer  from  the  first,  to  offer  all  the  quantity  requisite  to 
bring  its  current  value  to  the  level  of  the  cost  of  production, 
or  to  a  normal  value. 

In  any  case,  if  the  supply  determines  the  current  value,  as 
regards  the  normal  value,  the  opposite  of  this  is  the  truth  ; 
for  this  latter  value  is  determined  by  the  cost  of  production, 
independently  of  the  supply — ^and  the  normal  value,  in  its 
turn,  regulates  the  supply.  In  other  words,  there  is  produced 
and  there  is  offered  that  quantity  of  each  commodity  which 
can  be  disposed  of  at  a  value  determined  by  the  cost  of  pro- 
duction. 

The  cost  of  production,  to  which,  in  such  conditions  the  value 
of  the  products  adapts  itself,  may  or  may  not  be  reducible  to  the 
quantity  of  labour  effectively  employed  in  the  production  of 
these.  In  the  former  case,  the  value,  inasmuch  as  it  is  propor- 
tional to  the  cost  of  production  of  the  various  commodities,  is 
proportional  to  the  quantity  of  labour  employed  upon  them  ; 
in  the  latter  case,  these  two  elements  are  disproportionate. 

Such  are  the  phenomena  that  occur  as  long  as  isolated 
labour,  or  labour  integrated  only  through  complex  association, 
continues  to  produce  an  excess  over  and  above  what  is  required 
for  the  subsistence  of  the  producer. — But  as  the  popula- 
tion increases,  and  as  the  productivity  of  the  soil  con- 
currently dech'nes,  the  time  ultimately  arrives  in  which  the 
whole  or  a  part  of  the  isolated  labour,  even  if  this  be  rendered 
more  productive  by  improvements  in  technical  capital  and  by 
the  complex  association  of  labour,  becomes  hardly  equal  to 
the  task  of  producing,  over  and  above  what  is  required  for  the 
replacement  of  the  technical  capital  consumed,  the  producer's 
own  necessary  subsistence.  When  technical  development  is 
backward  it  may  happen  that  all  isolated  labour  will  find  itself 
in  this  situation.  It  has  been  shown  that  the  reason  why  the 
institution  of  slavery  is  impossible  to  a  people  living  by  the 
chase,  is  that  in  this  economic  phase  the  slave  consumes  as 
much  as  he  produces,  and  is  therefore  unable  to  earn  any  profit 
for  his  master.    This  depends  simply  upon  the  fact  that  in  this 


The  Production  of  Income  19 

economic  phase  labour  is  usually  isolated  and  therefore  has 
but  slender  productivity.  ^  When  technical  productive  powers 
are  in  a  more  advanced  state  of  development,  it  may  happen 
that  a  part  of  isolated  labour  produces  more  than  a  bare  sub- 
sistence ;  but  in  any  case  the  larger  moiety  of  such  isolated 
labour  will  be  unable  to  produce  anything  more  than  a  sub- 
sistence. Thus  at  the  present  day,  although  there  are  a  few 
small  proprietors,  agriculturists  or  manufacturers,  who  pro- 
duce by  their  isolated  labour  something  over  and  above  a  sub- 
sistence, it  is  none  the  less  true  that  in  the  great  majority  of 
cases  the  labour  of  the  petty  manufacturer  or  agriculturist, 
as  long  as  he  remains  totally  isolated,  or  at  least  as  long  as  his 
labour  is  not  supplemented  by  the  co-operation  of  other 
members  of  his  own  family,  hardly  succeeds  in  providing  the 
worker's  own  necessary  subsistence,  and  even  furnishes  a 
product  inferior  to  that  of  the  wage-worker.  ^  Thus  arises 
the  industrial  misery  which  characterises  dissociated  enter- 
prise. 

Now  inasmuch  as  isolated  labour,  even  if  it  limits  itself  to 
the  production  of  a  single  commodity,  is  for  the  most  part 
altogether  incapable  of  producing  more  than  the  labourer's 
subsistence,  it  evidently  follows  that  an  excess  over  and  above 
such  a  bare  subsistence  can  be  obtained  only  by  the  association 
of  a  number,  of  individuals  for  the  production  of  a  single  com- 
modity, or  in  other  words  by  the  institution  of  an  association 
of  labour  no  longer  complex  but  simple.^ 

*  Spencer,  Principles  of  Sociology,  London,  1896,  Vol.  Ill,  p.  459  ;  Nieboer, 
Slavery  as  an  Industrial  System,  The  Hague,  1900,  pp.  190,  256-7.  None  the 
less  Petrucci,  Les  Origines  naturelles  de  la  propridte,  Brussels,  1905,  pp.  188-9, 
221  (as  also  Linguet)  refers  to  certain  rare  examples  of  co-operation  even 
among  hunting  tribes. 

*  Leroy  Beaulieu,  Traiti  d^dconomie  politique.  Vol.  II,  p.  298  j  Booth, 
People  of  London,  Vol.  I,  pp.  60,  202,  etc. ;  and  Loria,  Costittiz.  Ec.  odierna, 
p.  663,  note. 

'  "  The  strongest  impulse  to  association  arises  out  of  the  contest  with 
nature.  The  production  of  food-stuffs  brings  about  association,  or  social 
cohesion,  and  this  leads  to  the  redemption  of  mankind  from  the  total  isolation 
which  characterises  the  lowest  grades  of  our  race  "  (Ratzel,  Volkerkunde, 
Leipzig,  1885,  p.  89). — The  need  for  the  association  of  labour,  which  mani- 
fests itself  in  an  urgent  form  even  in  the  most  ancient  economic  phases, 
makes  it  consonant  with  the  interests  of  human  society  to  preserve  even 
weakly  individuals  as  necessary  elements  of  productive  association.  Herein, 
in  the  field  of  social  phenomena,  we  see  a  further  exception  to  the  Darwinian 
theory.  Consult  in  this  connexion  Karl  Pearson,  The  Qrammar  of  Science, 
2nd  edition,  London,  1900  pp.  364,  et  acq. 


20  The  Economic  Synthesis 

The  simple  association  of  labour  is  homogeneous  when  the 
associated  labourers  all  perform  an  identical  task,  or  a  series 
of  identical  tasks.  Sometimes  these  labourers  have  no  other 
nexus  than  that  they  live  together  in  the  same  locality  ;  in 
other  words,  there  does  not  exist  any  co-ordination  of  labour, 
but  only  an  environmental  agglomeration. — ^In  other  cases,  the 
labourers  are  associated  by  a  more  intimate  nexus,  dependent 
upon  the  existence  of  some  central  motive  power  which  drives 
their  instruments,  these  latter  being  in  some  cases  in  a  single 
place,  but  in  other  cases  in  separate  habitations.  As  examples 
may  be  mentioned,  sewing-machines,  knitting-machines,  and 
the  hke,  connected  with  and  driven  by  a  single  electric  motor  ; 
small  private  steam  laundries  driven  from  a  central  power- 
house, etc. — More  commonly  the  identical  operations,  effected 
by  the  different  workers,  are  co-ordinated  by  some  concentrat- 
ing technical  instrument ;  as  when  a  number  of  workmen,  each 
pulhng  on  a  rope,  and  all  the  ropes  passing  over  a  single  pulley, 
raise  the  weight  of  a  pile-driver,  to  release  it  simultaneously, 
that  it  may  drive  the  pile  by  its  fall. — ^Finally,  in  a  more  ad- 
vanced stage,  in  place  of  or  in  addition  to  the  homogeneous 
simple  association  of  labour,  we  have  the  heterogeneous  simple 
association,  in  which  the  various  workers  or  groups  of  workers 
contribute  by  means  of  diverse  operations  to  the  production 
of  the  desired  object.  In  some  cases,  the  different  portions, 
or  the  successive  phases  of  elaboration,  of  a  single  product  are 
produced  or  effected  by  workers  living  apart,  these  portions 
or  phases  being  subsequently  assembled,  or  subjected  to  the 
final  stages  of  manufacture,  in  a  central  workroom  ;  in  other 
cases,  these  portions  or  phases  of  elaboration  are  produced  or 
effected  by  workers  brought  together  in  a  single  place,  thus 
avoiding  the  cost  of  transport  of  the  fragmentary  or  incom- 
plete products.  The  degree  of  association  may  be  more  or  less 
considerable,  the  number  of  the  workers  thus  associated  may 
be  larger  or  smaller,  and  the  complexity  of  their  co-ordination 
may  vary. — ^We  may  have  homogeneous  simple  association  in 
the  absence  of  heterogeneous  association,  and  vice  versa  :  on 
the  other  hand,  the  two  may  coexist  ;  or  the  various  phases 
of  heterogeneous  association  may  be  effected  b}^  so  many 
different  groups  of  co-operating  workers. 

The  simple  association  of  labour,  homogeneous  or  hetero- 


The  Production  of  Income  2 1 

geneous,  presupposes  in  its  turn  the  existence  of  a  series  of 
factors  which  may  be  reduced  to  the  following  : — 

{a)  Labour.  The  first  condition  requisite  for  the  organisa- 
tion of  the  association  of  labour  is  that  within  a  given  area 
there  should  exist  labourers  sufficiently  numerous  to  constitute 
the  association. — ^It  may  be  that  for  the  creation  of  the  associa- 
tion of  labour  the  workers  who  have  hitherto  been  producing 
separately  exist  in  sufficient  numbers.  On  the  other  hand, 
there  may  not  be  enough  of  these  to  undertake  the  association 
of  labour,  and  in  this  case  such  an  association  cannot  be  begun 
without  an  influx  of  additional  labour. 

(6)  Capital — ^the  capital  requisite  to  provide  the  maintenance 
of  the  associated  workers  and  to  furnish  the  instruments  with 
which  they  work. 

(c)  The  Technical  System.  The  association  of  labour  can- 
not be  effected  unless  the  technique  of  production  has  attained 
a  certain  degree  of  co-ordination  and  of  organic  complexity. 
It  may,  of  course,  happen  that  a  number  of  producers  associate 
their  labour  without  needing  to  make  any  changes  in  the 
technical  apphances  which  they  have  hitherto  used  as  isolated 
labourers.  More  commonly,  however,  the  association  of 
labour  involves  a  correlative  transformation  of  the  technique 
of  production,  or  a  replacement  of  the  separate  and  cellular 
instruments  hitherto  employed  by  a  system  of  technical 
appliances  more  or  less  intimately  connected,  this  being  at 
once  the  corollary  and  the  condition  of  the  association  of 
labour.  Even  in  the  first  phase  of  the  simple  association  of 
labour,  the  instruments  used  by  the  labourers  engaged  upon 
the  various  parts  or  stages  of  the  product,  although  physically 
disunited,  and  it  may  be  situated  in  diverse  locahties,  are  none 
the  less  ideally  connected  as  integral  and  inseparable  elements 
of  a  single  system  of  production.  But  the  association  of  labour 
at  a  higher  stage  of  development  brings  about  a  more  decisive 
revolution  in  technique,  inasmuch  as  it  involves  the  replace- 
ment of  a  plurality  of  technical  apphances  physically  dispersed 
by  a  system  of  technical  elements  physically  interconnected 
and  utilised  b}'  so  many  gi'oups  of  labourers. — In  other  words, 
at  this  stage,  dissociated  instruments  give  place  to  the  machine, 
and  owing  to  this  the  association  of  the  co-operating  labourers 


22  The  Economic  Synthesis 

is  no  longer  ideal  merely,  but  finds  a  concrete  materialisation 
and  a  visible  nexus  in  the  single  system  of  machinery  to  which 
their  work  is  subordinated. 

If  in  normal  cases  the  ampHfication  and  intensification  of  the 
technical  system  is  the  outcome  of  advances  in  the  association 
of  labour,  we  must  not  for  this  reason  exclude  the  possibility 
that  the  technical  system  may  also  undergo  amplification  and 
perfection  whilst  the  intensity  of  the  association  of  labour 
remains  unchanged — ^this  being  the  outcome  simply  of  the 
spontaneous  progress  of  invention.  The  perfection  of  tech- 
nique, however,  is  possible  only  as  a  result  of  the  existence  of 
associated  labour,  owing  to  the  fact  that  this  alone  creates 
the  base  of  operations  for  advances  in  machine  production. 
On  the  other  hand,  while  secondary  technical  advances 
may  occur  in  the  absence  of  any  precedent  change  in 
the  degree  of  association  of  labour,  it  is  none  the  less  true 
that  great  transformations  in  the  technique  of  production 
are  always  rendered  possible  and  are  always  preceded  and 
stimulated  by  changes  and  advances  in  the  association  of 
labour. 

In  broad  outline,  we  may  distinguish  between  three  forms  of 
industry  which  arise  as  corollaries  of  as  many  progressive  stages 
in  the  association  of  labour,  and  which  severally  correspond  to 
the  varying  complexity  of  the  technical  system.  (1)  Tht  craft, 
carried  on  by  an  isolated  individual  worker  with  the  aid  of  a 
unitary  technical  appfiance  ;  (2)  manufacture,  consisting  of  an 
extensive  association  of  labour,  occupied  with  the  aid  of  a 
system  of  technical  appHances  which  are  co-ordinated  but 
physically  disjoined  ;  (3)  machinofacture,  consisting  of  an  in- 
tensive association  of  labour,  occupied  with  the  aid  of  a  system 
of  technical  appHances  which  are  co-ordinated  and  also 
physically  conjoined.  But  each  of  these  forms  of  industry 
presents  numerous  and  significant  gradations,  these  varying 
(in  the  case  of  the  two  last  named)  according  as  the  association 
of  labour  is  more  or  less  elaborate,  and  in  correspondence  with 
the  more  or  less  perfect  development  and  the  greater  or  less 
complexity  of  the  productive  mechanism.^ 

A  See  Riekes,  Jahrbiicher  fiir  National.  Oelcon.,  1902,  pp.  185,  et  seq. — 
Sombart,  Der  moderne  KapitaZismus,  Leipzig,  1902,  Vol.  I,  pp.  26,  48,  et  aeq,, 
makes  the  perspicuous  observation  that  the  successive  forms  of  ind\istry  are 
distinguished  by  a  progressive  socialisation  of  labour,  and  that  machine- 


The  Production  of  Income  23 

{d)  Land.  It  may  happen  that  the  land  on  which  the 
individual  producers  have  hitherto  employed  their  dissociated 
labour  suffices  for  the  utihsation  of  their  associated  labour. 
In  other  cases,  however,  the  association  of  labour  cannot  be 
effected  unless  the  workers  who  have  previously  been  isolated 
acquire  a  further  extension  of  land,  which  is  thus  to  this  degree 
a  necessary  factor  in  the  association  of  labour. 

(e)  The  Work  of  Organisation  or  Direction.  There  is  need 
for  a  non-material  kind  of  labour  which  is  concerned  with  the 
organisation  and  co-ordination  of  the  respective  operations 
effected  by  the  associated  producers  and  with  the  employment 
of  the  various  productive  elements  ;  hence  this  kind  of  labour 
is  the  integrating  element  requisite  to  bring  about  the  associa- 
tion of  labour. 

The  simple  association  of  labour  cannot,  however,  be  effected 
without  involving  a  number  of  restrictions  upon  the  Hberty 
and  independence  of  the  producer.  Now  the  producer,  if  he 
obtains  by  means  of  isolated  labour  the  necessary  subsistence, 
will  not  spontaneously  submit  to  such  restrictions,  nor  spon- 
taneously determine  to  initiate  the  association  of  labour.  In 
such  conditions,  therefore,  the  free  association  of  labour  re- 
mains impossible. — On  the  other  hand,  in  so  far  as  isolated 
labour  produces  but  a  bare  subsistence,  the  isolated  producers 
are  so  weak  economically  as  to  be  unable  to  resist  a  force 
tending  to  impose  upon  them  the  association  of  their  labour  ; 
nay  more,  owing  to  this  same  economic  weakness,  they  are 

faoture  involves  a  more  intense  socialisation  of  labour  than  any  pre-existent 
technical  forms  of  production.  (On  this  point  consult  also  Seligman,  Principles 
of  Economics,  New  York,  1906,  p.  293.)  Sombart  writes  :  "  The  factory,  and 
hence  the  machine,  which  is  its  technical  expression,  is  the  instrument  of 
collective  labour  by  meajis  of  which  such  collective  labour  can  develop 
strength,  freedom,  safety,  and  rapidity,  exceeding  what  is  possible  to  the 
individual  organism."  In  other  words,  the  association  of  labour,  when  it 
has  attained  a  certain  degree  of  development,  calls  into  existence  a  technical 
system  corresponding  to  that  stage,  which  replaces  the  hand-tool  by  the 
machine.  Hence  this  last,  instead  of  being  the  cause  of  the  association  of  labour, 
as  Marx  contends  {Le  Capital,  Vol.  I,  p.  167),  is  its  result.  A  special  study  of 
industrial  evolution  in  Great  Britain  justifies  the  following  conclusion  :  '*  The 
essential  factor  of  economic  evolution  is  the  division  of  labour,  and  the  various 
phases  of  economic  development  correspond  to  the  progressive  stages  in 
the  division  of  labour.  From  this  point  of  view,  machinery  itself  is  no  more 
than  a  derivative  phenomenon.  Before  it  attained  the  position  of  one  of  the 
most  potent  factors  in  the  moulding  of  modern  society,  it  arose  as  the  resultant 
and  as  the  expression  of  the  division  of  labour  and  of  exchange  "  (Mantoux, 
La  r&voltUion  industrieUe  au  XVIII  siecle,  Paris,  1906,  p.  19). 


24  The  Economic  Synthesis 

exposed  to  thepossibilit}-  of  such  an  interference. ^  Hence,  in 
such  conditions,  labour,  since  it  produces  a  subsistence,  cannot 
be  associated  freely  ;  but  since  it  produces  nothing  more  than 
a  subsistence,  it  can  be  associated  hy  coercion.  Certainly  this 
coercion,  inasmuch  as  it  has  to  employ  material  means,  pre- 
supposes that  the  producers  are  securing  more  than  a  bare 
subsistence  ;  but  the  excess  over  and  above  a  bare  subsistence, 
which  hitherto  they  have  been  able  to  provide  by  means  of 
their  isolated  labour,  constitutes  the  foundation  of  the  power 
which  intervenes  at  this  point  to  impose  the  forced  association 
of  labour.  In  any  case,  at  this  stage  of  economic  development, 
while,  for  the  reasons  previously  explained,  the  free  associa- 
tion of  labour  is  impossible,  the  coercive  association  of  labour 
becomes  possible  and  necessary.  ^ 

Whereas  the  complex  association  of  labour  may  be  either 
free  or  coercive,  the  simple  association  of  labour  is  always  and 
necessarily  coercive.  Hie  coercion  which  brings  about  and 
disciplines  the  simple  association  of  labour  is  of  two  kinds  or 
degrees.  First  of  all,  there  is  the  initial  coercion  which  compels 
the  workers  to  associate  despite  their  instinctive  aversion  to 
cohesion.  But  even  after  the  workers  have  been  constrained 
to  association,  their  dispersive  individuahsm  makes  them  re- 
luctant to  co-ordinate  their  forces,  renders  each  man  unwilHng 
to  discipline  his  own  labour  in  correlation  with  or  in  depend- 
ence upon  that  of  his  fellows.  Thus  the  initial  coercion  by 
which  the  producers  are  forced  into  association,  is  necessarily 
succeeded  by  a  persistent  and  continuous  coercion,  compelling 
them  to  labour  in  conformity  with  a  unitary  plan  or  in  ac- 
cordance mth  a  concentrating  design. 

Now  the  coercive  element  thus  requisite  to  bring  about  the 
association  of  labour,  adds  a  new  factor  to  the  series  of  general 
conditions  essential  to  such  association  ;  that  is  to  say,  in 
addition  to  the  five  elements  previous^  enumerated  as  requisite 

1  Mandeville  and  Rousseau  agree  in  laying  stress  upon  man's  instinctive 
averaion  to  association  (they  refer  to  political  association  only,  but  it  is  even 
more  true  of  the  association  of  labovu'),  so  that  such  association  is  effected 
comparatively  late  and  under  the  influence  of  compulsion — the  coercive  force 
being  the  poverty  that  results  from  isolation  (Mandeville),  or  a  sequel  of  the 
unnatural  passions  of  ambition  (Rousseau).  Cf.  also,  in  this  connexion,  the 
remarks  of  Adam  Smith,  quoted  by  Bonar,  Philosophy  and  Political  Economy, 
London,  1893,  pp.  181-2. 

*  See  a  typical  example  in  Inama-Sternegg,  Deutsche  Wirtschafisgesch, 
Leipzig,  1879,  Vol.  I,  pp.  172-3. 


The  Production  of  Income  25 

to  render  associated  labour  possible,  it  is  necessary  that  there 
should  be  a  specific  work  for  the  coercion  of  the  associated 
producers. 

Thus  it  happens,  that  as  soon  as  the  fertihty  of  the  soil 
diminishes  to  such  an  extent  as  to  reduce  the  product  of  a 
more  or  less  conspicuous  portion  of  the  isolated  labourers  to 
the  margin  of  subsistence,  the  resulting  poverty  of  the  pro- 
ducers brings  into  action  a  force  of  constraint  which  effects 
the  association  of  these  producers  ;  that  is  to  say,  the  coercive 
association  of  labour  is  thus  brought  about.  Thus  the  exist- 
ence of  the  coercive  association  of  labour  affords  a  self-evident 
proof  of  the  existence  of  that  comparatively  inferior  degree  of 
the  fertility  of  the  soil  in  which  a  great  part  of  isolated  labour 
(however  well  equipped  with  technical  capita])  is  able  to  pro- 
duce no  more  than  a  bare  subsistence  ;  for,  if  there  were 
producible  an  excess  over  and  above  the  means  of  subsistence, 
the  isolated  producers  would  be  in  a  sufficiently  strong  economic 
condition  to  prevent  the  development  and  intervention  of  a 
force  tending  to  associate  them  coercively.  In  actual  fact, 
whenever  isolated  labour  effectively  produces  such  an  excess, 
this  is  either  because  it  has  access  to  a  soil  exceptionally  fertile, 
or  because  it  is  equipped  with  an  especially  efficient  technical 
capital,  or,  again,  because  its  own  intensity  is  supernormal — 
and  there  isolated  labour  manages  its  own  affairs  and  persists, 
to  the  exclusion  of  any  Idnd  of  association  ;  of  this  on  all  hands 
we  see  striking  examples. — ^If,  then,  isolated  labour  is,  in  a 
larger  or  smaller  area,  replaced  by  labour  coercively  associated, 
this  very  fact  demonstrates  that  within  the  area  in  question 
isolated  labour  is  incapable  of  producing  more  than  the 
labourer's  own  subsistence  ;  this  fact  and  this  fact  alone  it  is 
which  makes  him  economically  weak,  and  forces  him  to  submit 
to  the  coercion  of  an  associating  force.  From  this  it  follows  as 
a  consequence,  that  the  domain  of  isolated  labour  is  more  or 
less  extensive  according  as  the  number  of  workers  is  greater 
or  larger  who  are  able  to  obtain  something  more  than  a  bare 
subsistence  without  recourse  to  association  ;  and  the  con- 
verse of  this  is  true  of  associated  labour. 

This  fact,  that  associated  labour  comes  into  existence  where 
isolated  labour  is  able  to  provide  no  more  than  a  bare  sub- 
sistence, explains  why  it  is  that  the  coercive  association  of 


26  The  Economic  Synthesis 

labour  makes  its  first  appearance  in  comparatively  infertile 
regions.  Thus,  from  the  earliest  times,  while  in  the  more 
fertile  regions  of  the  south  the  methods  of  isolated  production 
still  prevailed  ;  in  the  more  sterile  areas  of  the  north,  agricul- 
ture had  already  assumed  purely  collectivist  characteristics. 
"  The  fundus,  a  form  of  property  essentially  individualist,  soon 
showed  itself  unsuitable  for  the  regions  of  the  north,  which 
required  a  collective  organisation,  as  regards  time,  place,  mode 
of  production,  the  methods  of  feeding  the  various  domesticated 
animals,  and  the  use  of  water  and  of  forests. "^ 

On  the  other  hand,  the  repugnance  to  the  association  of 
labour,  inasmuch  as  it  is  dependent  upon  the  high  fertihty  of 
the  soil  which  provides  labour  at  least  with  a  subsistence,  is 
more  intense  in  proportion  as  the  fertihty  of  the  soil  is  greater. 
Hence  even  in  our  own  day  in  Japan,  where  the  productivity 
of  the  soil  is  exuberant,  the  indigenous  population  displays  an 
invincible  aversion  to  labour  in  common.  ^  For  the  same  reason, 
southern  countries,  where  the  land  is  comparatively  fertile, 
are  less  suited  to  the  forms  of  production  that  require  the 
association  and  the  complex  co-ordination  of  the  individual 
forces,  whereas  in  these  lands  those  artistic  productions  de- 
pendent upon  isolated  initiative  thrive  by  comparison.  It  has 
been  acutely  observed  that  if  the  Itahans  succeed  better  in 
the  production  of  sweets  and  cakes,  and  the  Enghsh  in  the 
manufacture  of  biscuits,  this  is  because  the  latter  process  needs 
a  very  rigid  and  precise  association  of  labour,  while  for  the 
former  process  individual  and  undisciplined  labour  suffices.^ 

Just  as  the  repugnance  to  the  association  of  labour  is  more 
intense  where  the  productivity  of  the  soil  is  greater,  so  also  the 
coercion  which  associates  labour  is  more  intense  in  countries 
in  which  the  soil  is  more  fertile.  It  is  for  this  reason  that  the 
coercion  which  associates  labour  always  manifests  itself  in 
especially  harsh  forms  in  the  regions  of  the  south  where  the 
fertility  of  the  soil  is  usually  greater.  In  all  countries  and 
in  all  times,  the  scene  of  more  marked  constraint,  of  acts  of 
repression,  enslavement,  acts  of  governmental  violence,  and 
of  bureaucratic  and  military  tyranny,  has  always  been  the 
south  ;    the  most  cruel  slave-owners  of  whom  history  makes 

1  Vinogradoff,  The  Growth  of  the  Manor,  London,  1905,  pp.  85,  165,  183. 

2  Ono,  The  Industrial  Transition  in  Japan,  Baltimore,  1890. 
-  G.  Ferrero,  UEuropa  giovane,  Mil^n,  1897,  pp.  192-o. 


The  Production  of  Income  27 

mention  are  two  southerners,  Damophilos  of  Enna  and  his 
congenial  helpmate,  Megallis.  In  correspondence  with  this 
fact,  the  southern  labourers  of  all  ages  have  been  distinguished 
by  their  indomitable  unrest,  their  incHnation  to  violence,  their 
spirit  of  latent  revolt,  wherein  they  exhibit  a  striking  contrast 
to  the  more  conservative  and  temperate  character  of  their 
fellow- workers  in  the  north.  The  disciples  of  Montesquieu, 
who  regarded  the  thermometer  as  the  arbiter  of  universal 
history,  attributed  this  contrast  to  the  influence  of  climate  ; 
but  the  true  cause  is  to  be  found  in  the  specific  fertihty  of  the 
southern  soil,  which,  by  accentuating  the  repugnance  to  the 
association  of  labour,  renders  necessary  the  employment  of 
more  tyrannical  methods  of  coercion,  and  these,  in  their  turn, 
provoke  a  fiercer  and  more  formidable  reaction. 

Finally  since  the  repugnance  to  the  association  of  labour  is 
dependent  upon  the  fertihty  of  the  soil,  it  will  be  obvious  that 
this  repugnance  will  necessarily  diminish  in  proportion  as  the 
increase  in  population  leads  to  the  cultivation  of  land  of  less 
and  less  fertihty.  Now,  as  the  repugnance  to  the  association 
of  labour  dechnes,  there  is  a  correlative  dechne  in  the  degree 
of  coercion  necessary  to  enforce  such  association  ;  and  from 
this  it  follows  that,  other  things  being  equal,  with  the  progress 
of  the  economic  order  the  constraint  to  the  association  of  labour 
undergoes  a  progressive  diminution  in  intensity,  without,  how- 
ever, completely  disappearing. 

In  any  economic  phase,  the  constraint  to  the  association 
of  labour  varies  in  intensity  in  different  fields  of  production. 
For  the  various  kinds  of  production  coexistent  in  a  single 
economic  phase,  may  be  characterised  by  progressive  refine- 
ments of  the  association  of  labour,  respectively  requiring  a 
more  or  less  strict  employment  of  constraint.  Hence  the  in- 
tensity of  the  constraint  to  the  association  of  labour  varies 
not  only  in  time,  but  also  in  space,  according  as  that  associa- 
tion varies  in  intensity  in  different  coexisting  industries. 

Simple  association,  thus  effected,  does  not  exclude  the  co- 
existence of  the  complex  association  previously  estabhshed  ; 
for  groups  of  associated  producers  can  continue  to  confine 
themselves  to  the  production  of  a  single  commodity,  obtaining 
by  means  of  exchange  the  surplus  products  of  other  coexistent 
groups.     Now,  exchange  between  the  various  groups  of  pro- 


28  The  Economic  Synthesis 

ducers  coercively  associated  proceeds  in  accordance  with  the 
law  before  mentioned  regulating  the  exchange  between  single 
producers  ;  that  is  to  say,  the  value  of  the  products  is  in 
every  case  directly  determined  by  the  equivalence  between 
demand  and  supply,  and  ultimately,  if  there  is  competition 
among  the  groups  of  associated  producers,  by  the  cost  of 
production. 

All  coercion,  however,  involves  per  se  a  Hmitation  of  competi- 
tion, and  it  follows  from  this  that  the  necessary  result  of  con- 
straint to  the  association  of  labour  is  to  limit,  either  the  com- 
petition between  the  different  productive  associations,  or  the 
competition  between  the  members  of  a  single  association,  or 
both  one  and  the  other.  In  the  former  case,  where  there  is 
lacking  competition  between  the  different  productive  associa- 
tions, the  value  of  the  products  is  no  longer  equivalent  to  their 
cost  of  production  ;  in  the  latter  case,  where  there  is  lacking 
competition  between  the  members  of  a  single  productive 
association,  it  is  possible  that  some  of  these  producers  may  in- 
clude in  the  cost  of  production  certain  elements  for^gn  to 
the  quantity  of  labour  employed  in  production,  and  hence 
the  value,  while  it  may  be  commensurate  to  the  cost  of  pro- 
duction, is  not  commensurate  to  the  labour  expended. — In 
any  case,  the  use  of  constraint  to  the  association  of  labour 
necessarily  involves  a  failure  of  equivalence  between  the  value 
of  the  products  and  the  quantity  of  labour  which  these  pro- 
ducts contain,  unless  the  imperium  whence  the  coercion  pro- 
ceeds intervenes  to  impose  such  equivalence.  In  other  words, 
the  coercive  association  of  labour  always  and  of  necessity 
involves  (in  the  absence  of  intervention  on  the  part  of  the 
central  power)  a  failure  of  correspondence  between  the  labour- 
masses  incorporated  in  equivalent  products. 

Precisely  because  it  is  the  outcome  of  the  coercion  which 
imposes  the  association  of  labour,  this  failure  of  correspon- 
dence is  more  or  less  considerable  in  proportion  as  that  coercion 
is  more  or  less  intense.  Inasmuch  as  the  constraint  to  the 
association  of  labour  dechnes,  other  things  being  equal,  as  the 
productivity  of  the  soil  diminishes,  the  divergence  between 
the  value  of  the  products  and  the  effective  quantity  of  labour 
contained  in  these  products,  tends  also  to  diminish  pari  passu 
with  the  decline  in  the  productivity  of  the  soil  ;   but  so  long 


The  Production  of  Income  29 

as  any  constraint  continues,  this  failure  of  equivalence  cannot 
altogether  disappear. 

The  coercive  association  of  labour,  thus  effected,  increases 
the  product  of  each  labourer  to  a  degree  altogether  unattain- 
able by  isolated  labour  ;  in  other  words,  it  enables  the  labourer 
to  produce  a  surplus  over  and  above  what  is  required  for  his 
own  subsistence  and  for  the  redintegration  of  the  technical 
capital  consumed. — A  fraction  of  this  surplus  can  find  re- 
employment in  the  form  of  technical  capital  or  of  subsistence  ; 
but  there  is  always,  in  such  circumstances,  a  quantity  of 
product  in  excess  of  what  is  required  for  the  redintegration  or 
the  increase  of  subsistence  and  of  technical  capital.  Now,  the 
surplus  product  of  coercively  associated  labour,  after  there  has 
been  subtracted  from  that  product  what  is  required  for  the 
redintegration  and  increase  of  the  subsistence  of  the  labourers 
and  of  the  technical  capital,  constitutes  income.  In  essence, 
therefore,  this  is  a  phenomenon  of  production  arising  out  of  the 
enhanced  productivity  of  coercively  associated  labour  ;  and, 
precisely  because  it  is  the  specific  product  of  associated  labour, 
it  reappears  at  the  end  of  every  productive  cycle,  or  in  other 
words  it  has  an  essentially  periodic  and  recurrent  character. 
Thus  we  see  that,  if  the  cases  be  excepted  in  which,  more  or  less 
abnormally,  isolated  labour  produces  an  excess  over  and  above 
subsistence,  subsistence  and  income  differ  in  origin — ^for  the 
former  is  the  product  of  isolated  labour,  and  the  latter  of 
associated  labour.* 

This  throws  light  on  the  error  into  which  John  Stuart  Mill 
falls  when  he  refers  the  cause  of  the  profit  of  capital  to  the 
fact  that  labour  produces  more  than  is  necessary  for  the  sub- 
sistence of  the  producer.  2    It  is  true  that  labour  can  produce 

1  James  Steuart,  Principles  of  Political  Economy,  Basil.,  1796,  I,  p.  272, 
affirms  that  income  [profit]  is  due  to  an  increase  of  labour,  of  industry,  of 
ability,  or  in  more  general  terms,  to  anything  which  prolongs  labour  or  in- 
creases its  productivity.  Marx,  in  his  turn,  Kapital,  I,  p.  476,  III,  2,  pp. 
412-13,  and  Theorien  uber  den  Mehrwerth,  Stuttgart,  1905,  I,  pp.  39,  422-3, 
observes  that  surplus- value,  or  income,  makes  its  appearance  as  soon  as  the 
product  exceeds  what  is  required  for  the  labourer's  bare  subsistence,  and  that 
it  manifests  itself  in  all  the  economic  forms,  however  much  these  may  vary 
in  measure,  kind,  and  method  of  application.  "  The  surplus  product,  like  the 
surplus  value,  is  the  quantity  of  the  product,  theoretically  determinable, 
which  remains  after  subtracting  the  necessary  subsistence  of  the  labourer  " 
( Michlache wski  [Exchange  and  Political  Economy],  Dorpat,  1904,  p.  325). 

2  Principes  d'econo7nie  politique,  I,  p.  479.  What  Mill  says  concerning 
profit,  Malthus  had  previously  said  concerning  rent ;   for,  according  to  this 


30  The  Economic  Synthesis 

more  than  is  requisite  for  the  subsistence  of  the  labourer,  but 
if  labour  is  employed  without  the  assistance  of  capital, 
this  excess  does  not  go  to  constitute  a  profit  on  capital,  since 
there  is  no  capital.  The  fact  that  labour  produces  more  than 
is  requisite  for  the  labourer's  own  subsistence  does  not  give 
rise,  "per  se,  to  profit,  but  to  income,  which  will  be  assigned  to 
labour,  to  capital,  or  to  land,  according  as  other  conditions 
or  economic  processes,  which  cannot  be  discussed  here,  inter- 
vene. In  any  case,  income  is  always  the  result  of  a  specific 
productivity  of  labour  which  is  competent  to  produce  more 
than  the  labourer's  subsistence — ^a  specific  productivity  due 
always  and  solely  (if  we  except  the  primitive  period  in  which 
the  soil  is  exuberantly  fertile)  to  the  association  of  labour. 

The  coercive  association  of  labour  thus  gives  rise  to  an  excess 
of  product  over  and  above  the  subsistence  of  the  producer, 
theoretically  or  practicably  separable  from  subsistence,  and 
constituting  a  specific  category  known  by  the  name  of  income. 
The  formation  of  income,  then,  is  not  subordinated  to  any 
determinate  process  of  distribution  of  the  product  ;  on  the 
contrary,  income  is  produced  also  in  cases  in  which  the  product 
does  not  undergo  distribution  at  all,  but  is  integrally  garnered 
and  consumed  by  a  single  individual.  Neither  is  the  formation 
of  income  subordinate  in  any  way  to  the  existence  of  exchange, 
since  this  formation  may  perfectly  well  occur  within  a  natural 
economy.  1  The  formation  of  income  is  the  necessary  and 
spontaneous  outcome  of  one  single  fact  of  production,  the 
coercive  association  of  labour.  In  this  respect  it  differs 
markedly  from  some  of  its  own  subvarieties,  which  can  be 
produced  only  upon  the  basis  of  a  determinate  historical 
process  of  distribution  or  redistribution  of  the  product.  Rent, 
for  example,  has  as  its  first  precondition  the  varying  fertihty 
of  cultivated  land,  this  condition  being  one  of  the  facts  of 
production;    but  its  formation  or  appropriation  demands  in 

author,  rent  is  the  outcome  of  the  special  characteristic  of  agricultural  labour 
in  accordance  with  which  such  labour  always  produces  more  than  the 
labourer's  subsistence.  But  this  characteristic  is  purely  imaginary,  for  as 
soon  as  the  fertility  of  the  soil  declines  below  a  certain  level,  isolated 
agricultural  labotir  produces  nothing  more  than  the  quantity  of  food  sufficing 
for  the  nutrition  of  the  labourer,  and  enabling  him  to  obtain  in  exchange 
such  non-agricultural  products  as  are  absolutely  essential. 

^  A  Natural  Economy. — The  author  uses  this  term  to  denote  an  economic 
order  in  which  exchange,  even  by  way  of  barter,  is  unknown. — Translator's 
Note. 


The  Prodtictioii  of  Incmne  31 

addition  that  there  should  exist  a  determinate  system  of 
appropriation  of  the  land  and  a  determinate  general  distribu- 
tion of  wealth.  It  is  true,  also,  that  the  profit  of  capital  has 
as  its  first  presupposition  that  the  product  of  labour  should 
exceed  the  subsistence  of  the  labourer  ;  but  for  its  formation 
it  is  further  necessary  that  there  should  exist  determinate 
conditions  of  appropriation  of  the  land.  In  any  case,  to  the 
generation  of  individual  kinds  of  income  two  fundamental 
factors  contribute,  the  factor  of  production  and  the  factor  of 
appropriation.  In  its  integral  manifestation,  on  the  contrary, 
income  does  not  presuppose  the  existence  of  any  phenomenon 
or  any  element  of  appropriation  ;  it  is  a  phenomenon  of  pro- 
duction alone,  the  outcome  of  the  original  and  primal  fact 
of  the  coercive  association  of  labour.^ 

In  this  way,  an  elementary  fact  of  production,  it  may  be 
the  exuberant  productivity  of  the  soil,  or  it  may  be  the  coercive 
association  of  labour,  gives  rise  per  se  to  a  process — ^ideal  or 
actual,  as  the  case  may  be — of  distribution  of  the  product  (as 
subsistence,  on  the  one  hand,  and  as  income,  on  the  other), 
without  there  necessarily  occurring  any  phenomenon  of  ex- 
change, any  abstract  determination  of  value,  or  the  assign- 
ment of  a  value  to  any  of  the  respective  elements  of  production. 
It  follows,  that  the  process  of  distribution  is  the  immediate 

*  Adam  Smith,  who  takes  as  the  starting-point  of  economic  analysis  the 
association  of  labour,  or  the  original,  positive  and  universal  datiun,  the  un- 
differentiated matrix  of  all  the  forms  and  all  the  orders  of  economic  develop- 
ment, thus  attains  an  outlook  much  more  comprehensive  and  much  truer 
than  that  of  Ricardo  (and,  indeed,  of  Marx)  ;  for  Ricardo  starts  with  the 
analysis  of  the  essentially  derivative  phenomenon  of  exchange  value.  Adam 
Smith  has  the  same  advantage  over  the  modem  economists  who  take  as  a 
starting-point  the  subjective  and  extra-economic  phenomenon  of  utility. 
Adam  Smith,  however,  far  from  considering  the  association  of  labour  in  all 
its  complexity,  confines  himself  to  the  study  of  one  fragmentary  form,  namely, 
simple  heterogeneous  association  as  it  manifests  itself  in  manufacturing  in- 
dustry in  Scotland  during  the  eighteenth  century ;  for  this  reason,  his  analysis 
of  the  phenomenon  of  associated  labour  was  of  necessity  extremely  incomplete. 
A  recent  writer,  Effertz,  who  has  endeavoured  to  formulate  a  general  theory 
of  economics,  takes  as  the  first  elements  of  his  analysis,  labour  and  land.  This 
is  true,  in  this  sense,  that  the  coercive  element  implicit  in  the  association  of 
labour  is  in  its  turn  dependent  upon  the  conditions  of  productivity  of  the  soil 
as  displayed  in  all  the  historic  phases  hitherto  traversed.  But  Effertz  over- 
looks this  :  in  his  view,  land  moulds  the  economic  order  simply  because  the 
supply  of  land  is  limited  in  relation  to  the  demand  ;  that  is  to  say,  his 
theory  has  reference  to  a  fact  which  makes  its  appearance  only  when  the 
density  of  the  population  has  attained  a  comparatively  advanced  degree. 
From  this  we  see  that  the  latter  of  the  two  elements  adduced  by  Effertz  is 
essentially  temporal,  and  therefore  cannot  be  accepted  as  one  of  the  premises 
of  a  universal  economic  theory. 


32  The  Economic  Synthesis 

and  spontaneous  outcome  of  the  elementary  fact  of  produc- 
tion, and  of  this  alone,  this  displaying  ftr  se  the  effective 
interconnexion  of  economic  phenomena,  and  the  logical 
coherency  of  the  theory  formulated  to  elucidate  them.^ 

Income,  for  the  very  reason  that  its  occurrence  does  not 
presuppose  any  phenomenon  or  act  of  appropriation,  and  be- 
cause it  is  the  outcome  of  the  general  and  most  primal  fact  of 
coercively  associated  production,  thus  displays  itself  at  the 
outset  as  the  most  universal  and  abstract  category  of  the  science 
of  wealth.  It  reveals  itself  also  as  a  phenomenon  essentially 
integral  in  character  :  it  may  be,  integral  in  space,  in  so  far  as 
it  represents  the  conglomerate  of  a  pluraHty  of  disparate 
rewards  of  the  most  varied  productive  and  non-productive 
elements  ;  it  may  be,  integral  in  time,  in  so  far  as  it  represents 
the  unifying  synthesis  of  the  most  diverse  economic  forms. — 
The  two  aspects,  when  carefully  considered,  will  be  found  to 
correspond.  In  fact,  precisely  because  income  comprises 
within  itself  all  possible  modes  or  varieties  of  reward  as  these 
successively  appear  in  the  various  historical  phases  of  the 
economic  order,  it  is  impossible  that  it  should  derive,  as  do 
these,  from  a  fact  essentially  temporal  and  transitory  such  as 
the  distribution  of  the  product,  but  it  must  be  the  outcome  of 
a  fact  common  to  all  the  ages — the  fact  of  production.  Thus, 
beneath  its  undifferentiated  surface,  income  conceals  the  most 
diverse  economic  entities  and  the  most  diverse  social  forms. 
It  may  be  added  that  income  is  the  one  among  the  economic 
elements  which  has  the  most  eminent  sociological  value,  since 
it  is  an  attribute,  not  simply  of  a  more  or  less  limited  fragment 

*  A  state  of  affairs  can  be  imagined,  on  the  other  hand,  wherein  a  circula- 
tion occurs  without  there  being  manifest  any  phenomenon  of  distribution. 
Thus,  if  two  isolated  producers,  precisely  because  they  are  isolated,  are  able 
to  produce  no  more  than  a  bare  subsistence,  income  does  not  exist,  and  hence 
there  is  also  lacking  the  primitive  and  ideal  distribution  of  the  product ; 
but  if  each  of  the  two  workers  produces  only  one  or  only  a  part  of  the  com- 
modities necessary  for  his  own  consumption,  acquiring  the  other  commodity  or 
commodities  from  the  other  isolated  producer,  there  does  effectively  exist  a 
process  of  circulation  and  exchange.  But  the  hypothesis  under  consideration, 
that  isolated  labour,  or  labour  integrated  solely  by  complex  association,  pro- 
duces no  more  than  a  bare  subsistence,  is  an  irrational  one  ;  for  the  fact  that 
the  simple  association  of  labour  is  lacking,  suffices  per  se  to  show  that  the 
isolated  labour,  or  the  labour  integrated  solely  by  complex  as.sociation,  pro- 
duces more  than  a  bare  subsistence  ;  or,  in  other  words,  to  show  that,  in- 
dependently of  and  prior  to  exchange,  there  already  exists  income,  that  is  to 
say,  a  phenomenon  of  distribution. 


The  Proditction  of  htcome  33 

of  human  society,  but  of  a  notable  proportion  of  that  society, 
sometimes  even  of  the  whole.  Finally,  in  contradistinction  to 
the  various  specific  forms  of  income  (rent,  profit,  etc.),  which 
are  attributes  of  things,  inasmuch  as  they  have  reference  to 
land,  capital,  etc.,  income  is  an  essentially  human  phenomenon, 
inasmuch  as  it  is  a  direct  attribute  of,  or  has  direct  reference 
to,  man  himself.  Now  for  all  these  reasons,  by  its  character 
as  an  integral  phenomenon  throughout  space  and  time,  as  a 
synthesis  of  all  the  specific  attributes  of  economic  factors,  and 
of  all  the  historical  forms  of  economic  development,  as  a  fre- 
quent attribute  of  the  majority  of  the  population,  and  as  an 
essentially  personal  and  human  attribute — ^income  manifests 
itself  as  the  phenomenon  most  relevant  of  all  to  the  distribu- 
tion of  wealth,  and  as  the  fundamental  and  supreme  object 
of  the  economic  discipline.^ 

We  need  not,  however,  be  surprised  to  find  that  the  writers 
who  proceed  deductively,  affirm  with  one  voice  that  the  dis- 
cussion of  income  ought  to  come  at  the  beginning  and  not  at 
the  end  of  the  consideration  of  economics.  Thus  Storch  treats 
of  income  in  the  proem  of  his  text  book ;  and  D'Aulnis  de 
Bourouill  praises  him  warmly  for  this,  observing  that  the  theory 
of  income  is  the  preliminary  study  of  economics,  and  that  it 
throws  light  upon  the  fundamental  concepts  of  the  science. 2 
The  same  view  is  taken  by  Roscher,  Mithoff ,  and  other  writers. 
— But  one  who  adheres  to  the  positive  method  of  the  study 
of  these  phenomena  cannot  accept  this  view.  It  is,  in  fact, 
impossible  to  attain  to  the  integral  calculus,  except  by  way 
of  the  differential  calculus  ;  it  is  impossible  to  study  the  com- 

^  "  National  income  "  [in  which  Storch  includes  the  subsistence  of  the 
labourers],  *'  not  national  wealth,  constitutes  the  true  object  of  economic 
science.  For  the  aim  of  political  economy  is  to  discover,  not  merely  the  cause 
of  wealth,  but  also  the  cause  of  poverty,  and  poverty  exists  in  inverse  ratio 
to  the  quantity  of  national  income  "  (Storch,  Corao  di  Econ.  Pol.y  "  Bib.  Ec  ," 
p.  828).  An  analogous  idea  will  be  found  in  Marshall,  and  also  Fisher,  The 
Rate  of  Interest,  New  York,  1907,  p.  229.  Cannan,  also  {The  Division  oj 
Income,  "  Quarterly  Journal  of  Economics,"  1905,  pp.  341,  et  seq.),  shows  very 
well  that  it  is  time  that  to  the  theory  of  wages,  profit,  and  rent  there  should 
be  superadded  a  theory  treating  of  income  as  an  imdifferentiated  whole.  The 
idea  of  the  importance  of  the  theory  of  income  is  gradually  finding  its  way  into 
the  minds  of  enlightened  lawyers.  Thus,  in  a  book  which  has  had  much 
influence  in  the  preparation  of  the  German  Civil  Code,  we  read  :  "  without 
the  notion  of  income  it  is  impossible  to  understand  civil  law  as  a  whole  and 
impossible  to  understand  the  interconnexion  between  its  various  parts  " 
(Petrazycki,  Die  Lehre  vom  Einkommen,  Berlin,  1893,  Vol.  II,  p.  458). 

*  Het  Inkome  der  Maatschappij,  Leyden,  1874,  p.  205. 


34  The  Economic  Synthesis 

plex  and  universal  phenomenon,  except  as  a  sequel  of  a  minute 
and  accurate  study  of  particular  and  specific  phenomena. 
In  the  concrete  case  under  consideration,  it  is  impossible 
to  study  income  with  profundity  and  scientific  rigour,  unless 
we  know  the  static  and  dynamic  laws  of  the  various  kinds  of 
income,^  and  those  of  the  phenomenon  which  is  complementary 
to  income,  namely  subsistence  ;  and  it  is  further  essential 
that  we  should  first  have  investigated  the  specific  manifesta- 
tions of  these  laws  in  all  the  successive  historical  forms  of 
economic  development.  This  amounts  to  saying  that  the  dis- 
cussion of  income  must  not  precede,  but  must  follow,  the 
discussion  of  the  various  kinds  of  income  and  of  their  progres- 
sive manifestations.  For  the  rest,  the  history  of  political 
economy  furnishes  the  most  eloquent  testimony  to  this 
elementary  truth  ;  for,  while  economists  have  made  a  pro- 
found study  of  the  various  kinds  of  income,  they  have  known 
and  have  been  able  to  tell  us  nothing,  or  but  little,  about 
integral  income,  which  has  hitherto  been  the  undisputed 
domain  of  useless  classifications  and  petty  vacuities. ^  It 
seems,  therefore,  entirely  reasonable  that,  after  having,  as  a 
prehminary,  studied  the  laws  governing  the  various  kinds  of 
income  (differential  rent,  the  reward  of  the  entrepreneur,  the 
interest  on  productive  and  unproductive  capital,  the  rent  of 
monopoly),  no  less  than  those  of  subsistence,  and  having 
studied  them  in  the  successive  phases  of  the  economic  order, 
we  should  then  proceed,  and  then  only,  to  the  study  of  the 
economic  phenomenon  integral  in  space  and  time,  or  to  the 
investigation  of  income  in  its  entirety. 

1  Cf.  Cherbuliez,  Fr6c%8,  Vol.  I,  pp.  397-9. 

2  Marx  is  perfectly  right  when  he  finds  fault  with  the  classical  economists 
for  their  failure  to  consider  integral  income  ;  but  he  is  himself  in  error  in  his 
failure  to  point  out  the  impossibility  of  any  integral  analysis  until  the  research 
of  particular  phenomena  has  been  completed.  Cf .  Clark,  Essentials  of  Economic 
Theory,  New  York,  1907,  pp.  89-90. 


CHAPTER  II 

THE  DETERMINATION  OF  INCOME 

§1  Determination  of  Income  by  the  Real  or  Objective 

Method 

In  the  domain  of  social  wealth,  income,  thus  produced,  oc- 
cupies an  enormous  field,  which  must  now  be  accurately  deter- 
mined. Let  us  suppose  that  in  any  given  period  of  time,  in 
any  single  year,  for  example,  a  certain  total  product  is  ob- 
tained by  the  utiHsation,  in  any  society  or  in  any  particular 
country,  of  land,  labour,  and  capital ;  in  order  to  ascertain 
the  proportion  of  this  sum  total  which  constitutes  income,  a 
series  of  deductions  must  be  made.  More  particularly,  it  is 
necessary  to  deduct  from  the  gross  product : 

(a)  AQ  that  quantity  of  the  product  which  is  required  for 
the  redintegration  of  those  objects  of  consumption  which  are 
not  susceptible  of  indefinite  reproduction.  In  fact,  the  essen- 
tial character  of  income  being  its  periodical  reproduction  for 
an  indefinite  term,  no  consumable  wealth  which  cannot  be  in- 
definitely reproduced  is  income,  nor  do  those  products  con- 
stitute income  which  serve  to  redintegrate  what  is  consumed. 
Thus,  a  dweUing-house  bought  with  part  of  a  legacy,  being 
an  object  which  is  not  periodically  reproduced,  is  not  part 
of  income  ;  thus,  also,  the  amount  of  wealth  which  is  re- 
quired for  repairs  to  this  dweUing-house  constitutes  no  part 
of  income  ; 

{b)  All  that  quantity  of  the  product  which  is  required  for  the 
redintegration  of  the  technical  capital,  whether  productive  or 
unproductive,  consisting  of  articles  not  directly  consumable  but 
partially  used  up  in  the  process  of  production  or  in  that  of  ad- 
ministration.^   In  the  case  of  industries  not  Hable  to  exhaus- 

*  Fructtis  eo8  esse  constat  qui,  deducta  impensa,  supererunt,  L.  7,  D.  Soluto 
matrimonio,  dos  quemadmodum  petatur,  XXIV,  3.     In  Roman  law,  the  dia- 

35 


36  The  Economic  Synthesis 

tion,  this  quantity  is  directly  determined  by  the  annual  effec- 
tive consumption  of  the  technical  capital.  In  the  case,  on 
the  other  hand,  of  industries  subject  to  exhaustion,  such  as 
the  mining  industry,  this  quantity  is  equal  to  the  sum  total 
of  the  technical  capital  divided  by  the  duration  of  the  industry.  ^ 
The  whole  quantity  of  the  product  periodically  renewed 
which  remains  after  these  subtractions  have  been  made, 
constitutes  the  mass  of  the  products  of  unproductive  consump- 
tion, or  of  individual  enjoyment,  periodically  renewed,  in 
quantities  varying  more  or  less  in  different  cases — or  the  total 
net  "product.  Hence  it  follows  that  technical  capital  itself, 
where  it  consists  of  products  of  unproductive  consumption, 
or  of  enjoyment,  is  part  of  the  net  product.  Thus,  articles  of 
consumption  on  the  premises  of  the  trader  are  truly  capital  for 

tinction  is  made  between  the  impensae  necessariae  which  are  indispensable  to 
the  continuity  of  the  enterprise,  and  the  impensae  fructuum  "  quce  quaeren- 
dorum,  cogendorum,  conservandorumque  Jructus  gratia  fiunt  "  (Petrazycky, 
lib.  cit.y  I,  p.  150).  This  distinction  is  not  very  well  grounded,  inasmuch  as 
what  is  expended  for  the  redintegration  of  capital  is  expended  with  an  eye  to 
the  yield  ;  but  the  distinction  affords  a  confused  expression  of  the  essential 
difference  between  the  expenditure  requisite  for  the  redintegration  of  the 
technical  capital  consumed,  and  the  expenditure  requisite  for  the  increase 
of  that  capital. 

This  is  a  suitable  place  in  which  to  point  out  that  the  Roman  jurists,  who 
are  not  distinguished  by  the  possession  of  precise  ideas  concerning  the  single 
specific  categories  of  distribution  (profit,  rent,  etc.),  have  nevertheless  a 
very  precise  idea  of  income  {reditus,  a  word  employed  for  the  first  time  by 
Juhanus,  L.  92,  D.  De  legatis  et  fideicommissis,  XXXI-XXXII,  in  place  of 
the  term  previously  employed,  fructus,  which  related  to  an  epoch  of  natural 
economy).  This  depends  upon  and  confirms  what  we  have  already  main- 
tained, namely,  the  fact  that  income  is  a  phenomenon  manifested  throughout 
all  ages,  whilst  certain  subspecies  of  income  are  peculiar  to  economic  periods 
comparatively  advanced  in  development. 

^  Since  the  mining  capital  allowed  for  amortisation,  if  employed 
elsewhere,  can  produce  solely  a  profit,  but  not  a  rent,  and  could  therefore 
provide  only  a  total  income  inferior  to  the  yield  of  the  mine,  the  proprietor  of 
this  latter,  if  he  wishes  to  insure  the  perpetuity  of  his  actual  income,  must 
save,  in  addition  to  a  portion  of  income  sufficient  for  the  reconstitution  of 
the  technical  capital  during  the  period  of  exhaustion  of  the  mine,  a  further 
portion  of  income  sufficient  for  the  provision,  at  the  expiration  of  this  same 
period,  of  a  capital  which  will  furnish  a  profit  equal  to  the  actual  rent  of  the 
mine.  To  put  the  matter  more  concisely,  the  proprietor  who  wishes  to  be 
guided  by  strictly  economic  principles  must  subtract  from  the  income  a 
proportion  for  redintegration  which  will  be  competent  to  furnish,  when  the 
mine  is  worked  out,  productive  capital  capable  of  giving  an  income  equal 
to  that  which  he  now  derives  from  the  mine. 

Given,  then,  a  general  decline  in  the  level  of  profit,  all  industries  will  find 
themselves  in  the  same  conditions.  That  is  to  say,  for  each  industry,  if  the 
income  it  furnishes  is  to  be  maintained  intact,  it  does  not  suffice  to  redintegrate 
the  capital  actually  consumed  ;  it  is  further  necessary  to  accumulate  a  new 
capital,  the  profit  on  which  will  compensate  for  the  effective  reduction  in 
the  profit  on  the  pre-existent  capital. 


The  Determination  of  Income  37 

this  latter  ;  but  for  the  consumer  and  for  society  at  large  they 
are  net  product,  inasmuch  as,  for  these,  they  form  part  of 
directly  consumable  wealth.  Or,  better  expressed,  the  pro- 
ducts of  consumption  on  the  premises  of  the  shopkeeper  are 
net  product  in  a  preparatory  stage,  which  will  become  actual 
as  soon  as  they  have  passed  into  the  hands  of  the  consumer,  or 
as  soon  as  they  have  been  divided  between  the  shopkeeper 
and  the  consumer  as  the  result  of  a  process  of  exchange 
arranged  between  them.  ^ 

Leaving  out  of  account,  for  the  sake  of  simphcity,  the  wear 
and  tear  of  durable  objects  of  consumption,  it  may  be  said 
that  the  total  or  gross  product  consists  of  two  parts  ;  the 
redintegration  of  the  wear  and  tear  of  technical  capital,  con- 
sisting of  objects  not  directly  consumable  ;  and  the  mass  of 
directly  consumable  products.  Now  this  latter  portion  con- 
stitutes the  net  social  product,  which,  for  the  moment,  is  sub- 
stantially coincident  with  the  income.  This,  if  we  put  the 
question  of  exchange  aside,  is  apparent  from  immediate  evi- 
dence. If,  in  fact,  certain  workers,  making  use  of  a  given  quan- 
tity of  technical  capital,  directly  effect  the  redintegration  of 
the  wear  and  tear  of  technical  capital  and  also  the  production  of 
the  objects  of  their  own  consumption,  the  product  they  obtain 
consists  ^er  5e  of  two  quite  distinct  portions  :  the  redintegra- 
tion of  the  technical  capital  consumed,  consisting  of  articles 
not  directly  consumable  ;  and  a  quantity  of  consumable 
wealth.  Now,  the  net  product  consists  precisely  of  this  second 
quantity,  which  is  plainly  separable  from  the  first.  But  when 
exchange  takes  place,  is  the  case  substantially  altered  ?  It  is 
true  that  then  the  producers  of  articles  of  consumption  do  not 
produce  technical  capital,  but  only  articles  of  consumption  ; 
yet  this  happens  solely  on  condition  that  certain  other  producers 
are  exclusive  producers  of  technical  capital.  Hence,  in  these 
conditions  also,  the  total  product  obtained  from  the  whole  of 
the  labourers  consists  of  two  clearly  distinct  parts  :  a  quantity 
of  consumable  wealth  (produced  by  the  first  group) ;    and  a 

1  Smith,  Wealth  of  Nations  (Stand.  Ed.),  p.  229.— Schmoller  {Die  Lehre 
vom  Einkommen  in  the  "  Zeitschrift  fiir  die^esam.  Staatsw.,"  1863)  erroneously 
opposes  this  concKision,  maintaining  that  the  consumer  does  not  consume 
tlie  shopkeeper's  capital,  which  remains  unchanged,  but  consumes  income 
proper.  He  fails,  however,  to  recognise  that  this  income  is  made  up  precisely 
of  the  commodities  which  have  passed  through  the  hands  of  the  shopkeeper 
and  have  been  transferred  to  the  hands  of  the  consumer. 


38  The  Economic  Synthesis 

quantity  of  technical  capital  (produced  by  the  second  group). 
The  process  of  exchange  between  the  former  and  the  latter  has 
no  other  effect  than  to  enable  the  former,  whose  product  con- 
sists exclusively  of  articles  of  consumption,  to  reconstitute  by 
means  of  what  they  acquire  from  the  workers  of  the  second 
group  that  portion  of  their  technical  capital  which  has  been 
consumed  in  the  process  of  production  ;  and  to  enable  these 
latter,  who  have  devoted  themselves  to  the  production  of  non- 
consumable  articles,  to  procure  the  articles  of  consumption  of 
which  they  have  need  by  buying  these  from  members  of  the 
former  group.  But  all  that  this  effects  is  the  interchange  of 
articles  of  consumption  and  of  technical  capital  between  the 
two  groups  of  producers  ;  it  does  not  effect  any  change  in 
the  total  composition  of  the  product,  which  continues  to  con- 
sist of  two  distinct  parts,  incapable  of  fusion  or  of  mutual 
transformation — ^to  consist  of  technical  capital,  on  the  one 
hand,  and  of  articles  of  consumption,  on  the  other.  Now  the 
net  product  consists  solely  of  this  latter  portion,  and  not  in 
any  degree  of  the  former.* 

That  which  remains  of  the  gross  product,  after  subtracting 
the  technical  capital,  constitutes  the  nei  pi'oduct,  but  it  is  not 
yet  the  income.  For,  since  the  income  is  the  specific  product 
of  associated  labour,  it  is  evident  that  aU  that  portion  of  the 
net  product  which  is  equivalent  to  the  product  of  isolated 
labour  must  be  subtracted  from  the  total  product  in  order  to 
ascertain  the  income.  Or,  postulating  normal  conditions  in 
which  the  labourer  receives  as  his  subsistence  the  whole  pro- 
duct of  isolated  labour,  in  order  to  ascertain  the  income,  it  is 
proper  to  subtract,  from  the  product  of  associated  labour,  the 
subsistence  of  the  labourers.  Tlius  the  net  product  consists 
of  two  clearly  distinct  portions  :  subsistence,  which  represents 
the  product  of  isolated  labour  (employed  in  connexion  with  a 
unitary  technical  capital)  ;  and  income,  which  represents  the 
surplus  due  to  the  association  of  labour.  The  first  of  these  is 
an  initial  and  quasi-fixed  datum,  which  may  be  considered  as 

*  Contrary  opinions  are  maintained  by  the  following  writers  :  A.  Smith, 
Wealth  of  Nations,  p.  228  ;  Say,  TraiU  d'^conomie  politique,  1860,  p.  347  ; 
Cours  Complet,  Brussels,  1837,  p.  319;  note  to  Chap.  XXVI  of  the  French 
translation  of  Ricardo's  Principles  ;  Ferrara,  Preface  to  Vol.  II,  Series  I,  of 
the  Bibl.  delV  Econ.,  p.  xx  ;  Proudhon,  Resume  de  la  question  sociale.  Banque 
d'echange,  Paris,  1849,  p.  31  ;  Cannan,  History  of  the  Theories  of  Production 
and  Distribution  in  English  Pol.  Ec,  London,  1903,  2nd  edition,  p.  77. 


The  Determmation  of  Income  39 

a  postulate  of  production,  for  the  continued  application  of* 
labour  is  possible  only  on  condition  of  the  redintegration  of 
the  energy  employed  in  the  work  of  production.  On  the 
other  hand,  income  comes  into  existence  in  proportion  to 
the  degree  to  which  labour  is  associated  ;  and  it  is  produced 
in  a  quantity  which  varies  according  as  the  association  to 
labour  is  more  or  less  intense  and  more  or  less  efficient. ^ 
Whilst,  however,  subsistence  remains  unaltered,  or  nearly 
so,  under  the  most  different  conditions  of  prosperity  and 
of  civiHsation,  income  makes  its  appearance  to  an  extent 
which  differs  very  conspicuously  according  as  the  society  is 
more  or  less  prosperous  or  progressive,  and  the  quantity  of 
income  affords  to  that  extent  the  most  precise  measure  of  the 
conditions  of  civilisation  and  well-being  of  the  population. 
Hence,  and  for  this  very  fact,  income  contrasts  very  strikingly 
with  subsistence.  But  this  is  not  all.  Income  not  infrequently 
contrasts  with  subsistence  in  the  field  also  of  distribution, 
inasmuch  as,  in  many  economic  phases,  income  is  received  by 
the  members  of  different  classes  from  those  who  receive  sub- 
sistence, the  former  being  sharply  opposed  to  the  latter  in  the 
social  and  political  arena.  Once  more,  income  is  very  markedly 
contrasted  with  subsistence  in  the  field  of  consumption,  inas- 
much as  subsistence  takes  the  form  of  products  of  prime 
necessity,  whereas  income  largely  takes  the  form  of  superfluous 
products,  or  of  the  enjoyment  of  luxuries.  Finally,  in  the  act 
of  consumption  income  is  sharply  distinguished  from  sub- 
sistence, inasmuch  as,  in  many  cases,  subsistence  is  consumed 
by  day  and  income  by  night !  Nothing,  therefore,  could  be  more 
erroneous  than  the  arbitrary  confusion  of  these  two  portions  of 
the  net  product,  which,  as  we  have  shown,  present  in  all  their 
manifestations  diverse  and  contrary  characteristics.  No  more 
logical  demand  can  possibly  be  made  than  that  we  should 
distinguish  clearly  between  subsistence  and  income,  defining 
the  latter  as  that  part  of  the  net  product  which  remains  after 

*  In  truth,  as  we  shall  see  later,  there  are  cases  in  which  an  increase  of 
income  accompanies  a  diminution  in  the  productivity  of  labour.  But  this 
hapfKjns  only  on  condition,  either  that  there  is  a  diminution  in  individual 
subsistence  (which  presupposes  that  subsistence  is  no  longer  equal  to 
the  product  of  isolated  labom^),  or  else  that  there  is  an  increase  in  the 
number  of  labourers  employed.  So  long,  on  the  other  hand,  as  these  two 
elements  remain  constant,  the  quantity  of  income  is  always  a  precise  measure 
of  the  productivity  of  associated  labour. 


40  The  Economic  Synthesis 

subtracting  the  subsistence  of  the  labourers.  This  appHes  no 
less  to  unproductive  than  to  productive  labourers  ;  for,  if 
there  are  unproductive  labourers  who  receive  a  bare  subsist- 
ence, this  also  must  be  subtracted  from  the  product  in  order 
to  ascertain  the  income.^ 

From  the  fact  that  technical  capital  and  subsistence  are  not 
income,  it  follows  that  the  part  of  the  net  product  which  is 
saved,  productively  or  unproductively,  is  not  income.  In  fact, 
the  quantity  of  wealth  which  is  saved  undergoes  conversion 
2?er  5c  into  the  subsistence  of  workers  and  into  technical  capital 
(productive  or  unproductive),  that  is  to  say  into  a  kind  of 
wealth  which  does  not  form  part  of  income.  It  is  indeed  true 
that  the  quantity  of  the  product  which  is  converted  into 
technical  capital  and  subsistence  will  produce  income  in  the 
future  ;  hence  the  income  which  is  transformed  into  technical 
capital  and  subsistence  is  diminished  for  the  moment  only,  to 
increase  its  own  amount  in  time  to  come — il  recule  pour  mieux 
sauter.  Yet  this  does  not  exclude  the  further  possibility  that 
the  increment  of  the  product  which  will  mature  in  the  future 
(thanks  to  the  actual  employment  of  the  technical  capital  and 
subsistences),  may  in  its  turn  be  transformed  into  technical 
capital  and  subsistences,  and  therefore  may  not  form  part  of 
income.  In  any  case,  the  fact  remains  that,  at  any  actual 
moment  of  time,  aU  that  quantity  of  wealth  which  is  saved, 
or  transformed  into  technical  capital  and  subsistences,  does 
not  constitute  part  of  income. ^ 

It  foUows  from  this  that  if  John  Smith  employs  the  whole 
or  part  of  his  income  for  the  repayment  of  borrowed  capital, 

*  Contrary  opinions  are  maintained  by  the  following  writers  :  Mayer 
Das  Wesen  des  Einkommens,  Berlin,  1887,  p.  195  ;  Hermann,  Staatswirt- 
schaftliche  Untersuchungen,  Mimich,  1874,  pp.  696-8  ;  SchmoUer,  Die  Lehre 
vom  Einkomtnen,  "  Zeitschrift  fur  gesam.  Staatsw.,"  1863. 

2  For  the  adverse  opinion,  see  Schmoller,  GrundrisSy  p.  879.— Fisher 
{Nature  of  Capital  and  Income,  New  York,  1906,  pp.  135,  248,  et  aeq.)  clearly 
recognises  at  the  outset  that  that  portion  of  the  net  product  which  is  saved 
ceases  to  be  income  ;  but  he  goes  on  to  confuse  the  argument  and  to  contra- 
dict himself  by  introducing  the  needless  distinction  between  realised  income 
and  earned  income.  For  he  says  that  the  portion  of  the  net  product  which 
goes  to  increase  the  capital  is  not  realised  income,  but  forms  part  of  earned 
income  ;  so  that  if,  for  example,  the  rate  of  interest  is  5%  and  a  capital  of 
£10,000  gives  an  income  of  only  £200,  since  £300  are  devoted  to  the  increase 
of  capital,  then  the  realised  income  is  £200,  but  the  earned  income  is  £500 
{loc.  cit.,  pp.  234,  et  seq.).  But  this  is  incorrect,  since  the  earned  income  is  in 
this  case  £200,  while  the  £300  do  not  constitute  part  of  income,  but  go  to 
the  increase  of  capital. 


The  Determination  of  Income  41 

and  if  the  creditor  proceeds  to  reinvest  the  capital  thus  repaid, 
the  wealth  in  question  ceases  to  be  income  and  becomes  capital. 
The  same  considerations  apply  when  a  man  inherits  a  piece  of 
land  with  fruits  ripe  for  harvesting,  and  capitalises  these  in 
place  of  consuming  them  ;  or  when  a  husband  receives  as 
dowry  a  fund  with  accumulated  interest,  and  saves  this  latter 
instead  of  spending  it.  Similarly,  that  portion  of  the  new-born 
flock  which  is  employed  to  increase  the  stock,  or,  again,  over- 
due rent  on  which  interest  has  to  be  paid,  etc.,  constitutes  a 
part  of  income  which  is  transformed  into  capital,  and  y&r  se 
therefore  ceases  to  be  income.  The  same  considerations 
apply  to  the  portion  of  wealth  employed  for  insurance,  for 
this  is  immediately  converted  into  technical  capital  and  sub- 
sistences ;  these  produce  wealth  ;  this  wealth,  or  its  profit, 
will,  after  a  certain  lapse  of  time,  accrue  to  the  insured. 
Doubtless  such  profit  will  form  part  of  income,  but  the 
premiums  by  which  it  is  constituted  do  not  form  a  part  of 
income.^ 

To  sum  up,  since  the  essential  character  of  income  is  its 
periodical  reproduction,  it  is  evident  that  all  that  portion  of 
the  product  which  is  not  periodically  reproduced  is  not  part 
of  income.  Hence,  if  that  part  of  the  product  which  should  go 
to  redintegrate  the  technical  capital  and  the  subsistences,  is 
produced  and  consumed  instead  in  the  form  of  articles  of  con- 
sumption which,  from  the  nature  of  the  case,  are  not  period- 
ically reproduced,  it  is  not  income.  Similarly,  if  the  sum 
total  of  the  net  product  increases  owing  to  the  operation  of 
some  cause  of  a  non-recurrent  character,  the  additional  pro- 
duct is  doubtless  an  increase  of  capital,  but  it  is  not  income, 
although  it  may  give  rise  to  an  increase  of  income  in  the  future. 
Thus,  an  increase  effected  in  the  net  product  of  any  area 
by  inheritance  or  by  winning  a  prize  in  a  lottery,  derived  in 
either  case  from  abroad,  by  the  immigration  of  capitaUsts,  by 
an  aeroHte,  is  an  increase  of  property,  national  or  social,  but 
it  is  not  income,  since  it  lacks  the  essential  character  of  periodi- 

*  Willett  is  therefore  miataken  when  he  considers  insurance  to  be  a  pheno- 
menon of  production,  because  it  produces — safety.  Ferrara  is  also  mistaken  in 
regarding  insurance  as  a  phenomenon  of  circulation  ;  Seligman  is  mistaken 
in  considering  it  a  phenomenon  of  exchange  ;  and  Cossa  is  mistaken  in  con- 
sidering it  a  phenomenon  of  consumption.  Indeed,  it  is  nothing  more  than  a 
process  of  redistribution  and  of  accumulation,  or  of  a  partial  transformation 
of  income  into  capital. 


42  The  Economic  Synthesis 

city.i  Nor  is  this  all ;  for  that  part  also  of  the  net  product 
periodically  renewed  which  goes  to  constitute  casual  accrue- 
ments  does  not  form  part  of  income,  and  must  therefore 
be  subtracted  from  the  net  product  in  order  to  ascertain  the 
amount  of  the  real  income.  Hence  all  that  part  of  the  net 
product  which  passes  into  the  hands  of  thieves,  gamblers,  or 
mendicants,  constitutes  no  portion  of  social  income  ;  and  the 
same  is  true  of  the  wealth  paid  over  at  one  time  on  account  of 
insurance  to  the  victims  of  accidents  or  to  their  heirs. 

The  totahty  of  social  wealth  therefore  consists  of  the  follow- 
ing portions  :  a  quantity  of  articles  of  consumption  not  in- 
definitely periodical,  technical  capital,  subsistences,  and  a 
quantity  of  articles  of  consumption  indefinitely  periodical. 
Now,  all  the  indefinitely  periodical  accruements  comprising 
the  fourth  portion  of  wealth  constitute  income  ;  whereas  the 
non-periodical  accruements,  and  those  which  are  either  non- 
periodical  or  but  fugitively  periodical,  comprising  the  other 
portions  of  wealth,  are  not  income.  The  unproductive  con- 
sumption of  technical  capital  or  of  subsistences  will  diminish 
the  second  or  the  third  portion  in  order  to  increase  the  first  ; 
but  there  cannot  thus  be  effected  any  increase  in  the  quantity 
of  the  articles  of  consumption  that  are  indefinitely  periodical, 
nor  therefore  any  increase  in  the  income. ^  Accumulation 
increases  the  second  and  the  third  portions  at  the  expense  of  the 
fourth,  and  thus  directly  diminishes  income. 

These  are  the  only  subtractions  which  have  to  be  made  from 
the  product  in  order  to  ascertain  the  total  income.  The  other 
subtractions  which  various  authorities  have  proposed  are 
irrational.  For  example,  some  wTiters  propose  that  for  the 
determination  of  the  amount  of  real  income  there  should  also 
be  subtracted  from  the  total  net  product  the  subsistence  of 
the  recipient.    Of  course,  where  the  recipient  is  himself  at  the 

*  The  opposite  view  is  maintained  by  Schanz,  who  includes  in  income  all 
such  increments  of  property.  (Der  Einkommensbegriff  und  die  Einkom- 
rnensateuergesetze,  "  Finanzarchiv,,"  1896,  pp.  24,  71,  et  seq.). — On  the  other 
side,  considt  Gartner,  Ueher  den  Einkommensbegriff,  ibid.,  1898,  pp.  44,  et  seq. 

*  It  may  indeed  happen  that  income  increases  at  the  expense  of  sub- 
sistence ;  but  in  that  case  we  have  no  longer  to  do  with  the  unproductive 
consmnption  of  part  of  the  subsistence  capital,  implying  a  diminution  in  the 
labour  employed,  and  consequently  a  diminution  in  the  product  and  in  the 
income.  In  such  a  case,  the  same  labour  and  the  same  product  are  obtained 
by  a  lesser  subsistence,  so  that  there  is  a  relative  increase  of  income. 


The  Determination  of  Income  43 

same  time  a  labourer,  there  can  be  no  doubt  that  his  sub- 
sistence, Hke  that  of  any  other  labourer,  must  be  subtracted 
from  the  income.  What  these  writers,  however,  contend  is, 
that  in  order  to  ascertain  the  income  there  should  be  sub- 
tracted from  the  total  net  product  the  subsistence  also  of  a 
recipient  who  is  not  personally  engaged  in  productive  labour  ; 
for,  they  say,  subsistence  is  itself  the  condition  necessary  to 
the  very  existence  of  income,  and  therefore  forms  a  part  of 
the  cost  of  its  production. 

But  such  a  way  of  looking  at  the  matter  is  radically  unsound. 
In  the  first  place,  it  is  easy  to  show  that,  whilst  the  subsistence 
of  the  worker  is  a  precise  quantity,  and  one  commensurate 
to  the  needs  of  existence,  the  subsistence  of  the  recipient  of 
income  who  is  independent  of  the  need  to  labour  is,  on  the 
other  hand,  an  elastic  and  ill-definable  quantity,  that  the  con- 
cept is  one  altogether  hazy  in  its  outfines  and  tending  to  include 
the  most  diverse  and  most  dubious  elements.  Jung  enumerates 
among  these  latter,  in  addition  to  food,  clothing,  and  educa- 
tional expenses,  even  the  reasonable  amusements  of  the 
capitahst  and  his  family.  Now  since,  in  substance,  all  the 
accrue  me  nts  of  the  wealthy,  in  so  far  as  they  are  not  saved, 
are  expended  upon  such  things  as  food,  clothing,  education, 
and  amusements,  such  a  way  of  regarding  the  matter  would 
soon  force  us  to  conclude  that  the  accruements  of  the  capitaHst 
coincide  with  his  subsistence,  or,  in  other  words,  that  income  is 
non-existent.  But  nothing  can  be  more  absurd  than  to  consider 
the  subsistence  of  the  idle  recipient  as  an  essential  and  neces- 
sary part  of  the  cost  of  production  of  income.  The  product 
can  be  obtained  perfectly  well  and  the  income  can  be  generated, 
even  if  the  recipient  of  income  does  not  exist  or  is  eliminated 
from  consideration.  This  is  proved  every  day  in  the  case  of 
unclaimed  inheritances,  which  continue  to  produce  an  income 
although  there  is  no  recipient  ;  it  is  proved  in  the  case  of  the 
property  of  the  insane,  of  incapables,  of  idiots,  of  persons  in 
their  second  childhood,  which  continues  to  produce  an  income 
although  the  personality  of  the  recipient  is  virtually  obHter- 
ated,  so  that  he  is  unable  to  take  any  part  in  the  administra- 
tion of  his  possessions.  Still  commoner  and  less  painful 
examples  are  found  in  the  case  of  the  property  of  absentees, 
rakes,  and  men  of  pleasure,  for  such  property  continues   to 


44  The  Economic  Synthesis 

produce  income,  while  the  owner  ignores  the  sources  of 
his  income  in  pursuit  of  more  agreeable  occupations.  The 
old  argument  which  represents  the  subsistence  of  the  re- 
cipient of  income  as  a  part  of  the  cost  of  production  is  there- 
fore nothing  more  than  one  of  a  number  of  anod^^ne  forms  of 
apology  for  property,  which  are  employed  in  the  vain  hope  of 
effacing  the  parasitic  and  otiose  stamp  of  that  institution,  and 
of  assigning  to  it  by  forcible  means  a  productive  and  socially 
beneficent  function.  However  pleasing  this  argument  may  be 
to  the  ears  of  the  favourites  of  fortune,  it  is  impossible  to  accept 
it  under  the  white  light  of  pure  science.^ 

The  question  being  mooted  regarding  the  reward  of  the 
director  or  of  the  entrepreneur,  it  may  be  claimed  that  their 
subsistence  at  least  ought  to  be  subtracted  from  the  product 
in  order  to  ascertain  the  amount  of  the  income.  The  answer 
to  this  contention  is  obvious.  If  the  position  of  the  entrepreneur 
is  equivalent  to  that  of  the  labourer  who  receives  merely  a 
subsistence,  or  to  that  of  the  working  capitaHst  who  receives 
both  subsistence  and  income,  his  recompense,  or  that  part  of 
it  which  constitutes  subsistence,  ought  to  be  subtracted  from 
the  income,  precisely  as  is  to  be  subtracted  the  subsistence 
of  the  simple  labourer  or  the  subsistence  of  the  working 
capitalist.  If,  on  the  other  hand,  the  entrepreneur's  position 
is   superior  to  that   of  the  working  capitahst,   his  state   is 

*  "  Certain  authors  assign  to  the  profit  and  loss  account  of  an  enterprise 
the  domestic  expenditure  of  its  proprietor.  This  method  of  calculation  is 
evidently  false.  The  profit  and  loss  account,  which  represents  the  balance 
sheet  of  the  conduct  of  the  enterprise,  must  be  charged  with  all  the  expendi- 
ture proper  to  that  enterprise,  but  not  with  expenditure  which  has  no  neces- 
sary relation  to  this  latter  "  (Gomberg,  ha  scietice  de  la  comptabilite  et  son 
systeme  scientiiique,  Paris,  s.d.^  p.  66). 

According  to  a  well-known  argument,  what  is  expended  upon  the  education 
and  upbringing  of  children,  even  when  these  belong  to  the  class  of  the  recipients 
of  income,  constitutes  a  social  capital,  which  the  children,  as  soon  as  they 
attain  the  productive  age,  have  to  repay  ;  it  is  held  to  be  indubitable  that 
wealth  thus  expended  is  a  part  of  income  which  has  been  transformed  into 
capital,  that  is  to  say,  it  has  ceased  to  form  a  part  of  income  properly  speaking. 
But  this  argument  is  a  forcible  extension  of  capitalist  relationships  and 
capitalist  phraseology  to  phenomena  of  a  totally  different  character.  The 
truth  is  that  the  wealth  expended  in  the  upbringing  of  children  is  not  expended 
in  order  to  obtain  a  profit,  but  simply  in  order  to  raise  the  mental  and  moral 
level  of  the  young,  and  therefore  it  is  not  capital  at  all.  Hence  the  conven- 
tional phrase,  to  the  effect  that  the  death  of  children  or  emigration  deprives 
the  nation  of  capital,  is  absolutely  fallacious,  and  serves  only  to  demonstrate 
the  crass  and  irrational  materialism  of  certain  pundits  who  themselves  con- 
demn materialism  precisely  where  it  is  most  in  place. — For  the  opposite  view 
consult  Thiinen,  Isolierter  Staat,  II,  2,  pp.  146-9. 


The  Deterrninatioii  of  Income  45 

comparable  to  that  of  the  pure  recipient  of  income,  and 
the  entrepreneur's  subsistence  will  then  form  a  part  of 
income  precisely  as  does  that  of  the  pure  recipient  of  income. 
For  the  rest,  this  conclusion  approximates  to  that  upon  which 
for  a  long  time  past  practical  writers  have  been  agreed.  It  is 
true  that  the  earliest  among  these  arrive  at  this  conclusion, 
not  so  much  on  theoretical  grounds,  as  on  account  of  the  in- 
superable material  difficulties  in  the  way  of  the  determination 
and  subtraction  of  the  entrepreneur's  reward.^  But  Thaer 
explicitly  states  that  the  director  of  an  agricultural  enterprise 
and  his  family  must  be  considered  apart  from  production  ; 
and  in  his  view  the  wealth  which  they  receive  does  not  con- 
stitute a  cost  which  ought  to  be  subtracted  from  the  product 
in  order  to  ascertain  the  income,  but  is  an  integral  portion  of 
the  latter.  2  Now,  his  conclusion  ought  not  to  be  based  upon 
mere  difficulties  of  book-keeping,  but  upon  rational  arguments. 
To  obtain  the  total  income,  therefore,  it  is  proper  to  subtract 
from  the  total  annual  product  the  redintegration  of  the  techni- 
cal capital,  the  subsistences  of  the  manual  labourers,  and  of 
the  intellectual  labourers  upon  a  similar  footing,  and  the 
quantity  of  the  product  which  is  non-periodical,  or  which  is 
disposed  of  in  non-periodical  or  fugitively  periodical  accrue- 
ments  ;  whilst  the  fractions  of  the  residual  mass  of  wealth 
which  are  consumed  by  single  individuals  directly,  and  in  an 
indefinitely  periodical  manner,  constitute  the  individual  in- 
comes of  these.  The  quantity  of  wealth  thus  determined  may 
take  the  form  of  products  of  immediate  consumption,  varying 
in  different  cases,  and  lasting  for  a  longer  or  a  shorter  time ; 
thus  it  may  appear  as  food,  or  as  objects  of  luxury  which  are 
immediately  consumed  in  process  of  use,  or  it  may  appear  as 
clothing,  horses,  motor-cars,  or  dweUing-houses  ;  but  in  every 
case  it  consists  of  articles  of  consumption  of  a  reproducible 
character,  and  thus  retains  the  character  of  income.  In  every 
case,  moreover,  the  enduring  products  of  consumption,  when 
they  have  been  obtained  by  means  of  income,  and  therefore 
by  means  of  reproducible  wealth,  are  a  part  of  income  ;  where- 
as they  are  a  part  of  capital  when  they  have  been  acquired 

*  Waltz,  Yom  Beinertrag  in  der  Landvnrtachaft,  Stuttgaxt,  1904,  pp.  40,  44. 
^  Thaer,  Einleitung  zur  Kenntniaa  der  engl.  Landivirtschaft,  2nd  edition, 
Hanover,  1801,  pp.  68,  et  seq. 


46  The  Economic  Synthesis 

with  a  portion  of  the  capital  of  the  recipient  of  income.  For 
example,  a  dwelling-house  which  has  been  acquired  with  in- 
come (which  naturally  presupposes  an  income,  and  a  fortiori 
a  capital,  considerable  in  amount)  is  itself  income  ;  whereas 
one  acquired  by  capital  is  itself  capital.  Consequently,  if  the 
dwelhng-house  is  income,  the  expenditure  needed  for  the  re- 
pairs to  this  house  is  a  reconstitution  of  income,  and  is  therefore 
itself  income  ;  whereas,  if  the  house  forms  a  part  of  capital, 
the  cost  of  its  redintegration  effects  a  redintegration  of  capital, 
that  is  to  say,  it  does  not  form  part  of  income. 

The  income,  thus  determined,  divided  by  the  cost  necessary 
for  its  production,  or  by  the  sum  of  the  factors  out  of  which 
it  emanates,  gives  the  rate  of  income. 

It  arises  out  of  all  that  has  been  said  that  the  determination 
of  income  presupposes  a  series  of  conditions  which  will  be  found 
to  exist  only  in  an  advanced  stage  of  civiUsation.  In  the  first 
place,  in  an  economy  of  exchange,  the  individual  income 
cannot  be  determined  (and  a  fortiori  the  rate  of  income  cannot 
be  determined),  unless  we  know  the  portion  of  the  gross  in- 
dividual product  which  has  to  be  exchanged  for  the  technical 
capital  and  the  subsistences  consumed  in  the  productive 
process  and  devoted  to  the  work  of  redintegration  ;  and  this 
renders  it  necessary  that  we  should  determine  the  value  of  the 
product  obtained  by  the  recipient  of  income  relatively  to 
technical  capital  and  to  subsistences,  or  the  value  of  all  three 
of  these  products  relatively  to  money.  On  the  other  hand, 
when  we  wish  to  compare  the  social  incomes  of  different 
countries  or  different  ages,  consisting  in  great  part  of  different 
commodities,  it  is  necessary  to  reduce  these  incomes,  or  the 
commodities  of  which  they  consist,  to  the  terms  of  a  single 
commodity,  whether  this  be  itself  an  article  of  consumption,  or 
money — (although  this  method  cangive  unequivocal  results  only 
when  the  cost  of  the  various  products,  including  money,  is 
constant,  or  when  the  respective  costs  of  these  have  undergone 
proportional  changes).  This,  however,  is  not  enough  ;  for, 
to  render  the  determination  of  the  income  possible,  it  is  further 
necessary  that  the  theory  and  the  practice  of  book-keeping 
should  have  been  originated  and  should  have  become  diffused. 
Now,  this  occurs  only  in  comparatively  advanced  economic 
phases.     A  very  early  manifestation  of  book-keeping,  in  a 


The  Determi7tation  of  Income  47 

form  quite  empirical,  was  to  be  found,  it  is  true,  under  the 
slave-holding  system,  in  Greece  and  in  Rome,  where  Gcero 
and  Plautus  speak  of  account  books  kept  by  the  farmers  of 
the  taxes  as  also  b}^  private  proprietors  ;  and  PHny  even  refers 
to  book-keeping  by  double  entry.  ^  Moreover,  in  the  absence 
of  book-keeping,  the  determination  and  accurate  measurement 
of  income,  of  which  we  find  examples  in  Xenophon  and  among 
the  Roman  jurists,  would  have  been  impossible.  From  these 
imperfect  beginnings,  however,  with  the  further  development 
of  income  of  the  feudal  economy,  by  which  exchange  was 
almost  entirely  excluded,^  book-keeping  fell  into  disuse,  to 
reappear,  this  time  in  a  methodical  form,  only  with  the 
development  of  income  derived  from  the  wage  system.  Yet 
everyone  knows  that  this  science,  though  it  had  been  long 
in  existence,  and  had  been  the  glory  of  the  Venetian  Repubhc, 
was  not  introduced  into  the  administration  of  the  state  until 
three  centuries  after  its  discovery,  while  four  centuries  elapsed 
before  it  was  adopted  in  the  management  of  industrial  enter- 
prises, and  even  then  in  an  imperfect  and  sufficiently  barbarous 
form.  As  late  as  the  beginning  of  the  nineteenth  century,  it 
took  the  form  simply  of  a  precise  keeping  of  books,  and  did 
not  in  any  way  effect  the  determination  of  the  net  entry, 
which,  it  was  said,  would  be  self-evident  at  the  end  of  the  year 
from  the  state  of  the  cash  balance.  As  regards  agriculture, 
conditions  were  still  worse.  In  England,  for  a  long  time, 
the  only  known  way  of  measuring  the  income  from  estates  was 
by  the  size  of  these  estates.'*  In  Prussia,  only  in  the  time  of 
Frederic  WiUiam  I  (eighteenth  century)  did  they  learn  to  keep 
correct  accounts*;  but  double  entry  did  not  become  known 
tiU  much  later,  and  with  regard  to  it  the  classical  economists, 
including  Thaer  himseK,  retained  extremely  misoneistic  and 
erroneous  opinions.  Now,  so  long  as  the  book-keeping  records 
of  enterprise  are  so  scanty  and  inefficient,  there  are  insuperable 
obstacles  to  the  material  determination  of  income.     Just  as 

1  Oliver,  Roman  Economic  Conditions  to  the  Close  of  the  Republic,  Toronto, 
1907,  p.  130. 

2  Cf.  Inadna-Stemegg,  loc.  city  II,  pp.  261-2.  However,  as  early  as  the 
year  1152,  in  a  contract  of  sale  quoted  by  Anton  {Oeschichte  der  teiUschen 
Landioirtschaft,  GSrlitz,  1799,  et  seq.,  II,  pp.  112-14),  we  find  an  estimate  of 
the  monetary  income  derived  from  an  estate. 

'  Gneist,  Self  government,  Berlin,  1871,  p.  147. 

*  Ranke,  Preussische  Oeschichte,  III,  Leipzig,  1874,  pp.  160-1. 


48  The  Economic  Synthesis 

the  temperature,  which  is  a  phenomenon  common  to  all  ages, 
could  not  be  subjected  to  measurement  until  after  the  invention 
of  the  thermometer,  so  also  income,  a  phenomenon  common 
to  all  the  ages  of  history,  could  not  be  measured  until  after  the 
invention  and  universal  adoption  of  the  most  advanced 
methods  of  book-keeping.^ 

Even  after  the  invention  and  general  adoption  of  book- 
keeping, the  determination  of  income  may  present  difficulties 
by  no  means  easy  to  overcome.  Thus,  there  are  certain  forms 
of  income  in  which  the  economic  system  itself  renders  impossible 
exact  methods  of  book-keeping.  For  this  reason,  for  example, 
the  slave-owners  in  the  Southern  States  of  the  American 
Union,  make  no  use  of  book-keeping.  The  same  applies  to 
the  conduct  of  enterprise  by  serfs,  and  also  to  the  manage- 
ment of  the  farms  held  by  working  tenant  farmers  in  modern 
Russia. 2  But,  putting  these  difficulties  on  one  side,  the 
determination  of  income  remains  difficult  enough  when  there 
is  lacking  a  correlation  between  the  respective  parts  of  the 
cost  of  production  and  of  the  income,  or  when  there  is  lack- 
ing a  coincidence  in  time  between  one  and  the  other.  There 
is  in  the  first  place  that  category  of  the  general  expendi- 
ture which  cannot  be  assigned  separately,  or  in  ascertainable 
proportions,  to  the  respective  products,  so  that  it  becomes 
altogether  impossible  to  distinguish  with  precision  the  portions 
of  income  appertaining  to  single  sections  of  a  given  under- 
taking 8  Further,  the  general  expenditure  should  not  be 
wholly  charged  to  current  account,  being  partly  incurred  with 
reference  to  future  accounts  ;  whence  there  arises  a  new 
difficulty  in  determining  the  income  in  any  given  account. 

^  It  must  further  be  added  (as  is  pointed  out  by  Biicher,  Entstehung  der 
Volkswirtachaft,  Tubingen,  1893,  pp.  41,  63-4)  that  in  former  times  income, 
inasmuch  as  it  was  hoarded,  was  difficult  to  distinguish  from  capitalised 
property.  This,  however,  and  the  other  analogous  influences  previously 
mentioned,  though  they  might  render  it  difficult  to  determine  income  in 
former  times,  could  not  cancel  the  existence  of  this  fundamental  category  in 
earlier  economic  phases.  Though  sometimes  more  and  sometimes  less  obvious, 
income  has  always  existed  wherever  human  labom*  has  been  associated. 

'  Von  Halle,  Baumwollproduktion,  etc.,  in  der  Nordamerikan.  Sudstaaten, 
Leipzig,  1897,  I,  p.  356  ;  Tugan-Baranowski  [The  Nationalisation  oj  the 
Land],  Petersburg,  1906,  p.  95  ;   Thiinen,  Isol.  Stoat,  II,  2,  p.  237. 

•  Cf.  Lecouteux,  Econ.  rurdle,  II,  pp.  320-4. — In  Roman  jurisprudence, 
it  had  already  been  pointed  out:  "  Quod  in  sementem  erogatur,  si  non  re- 
sponderint  messes,  ex  vindemia  deducetur,  quia  totius  anni  unus  fructus  est " 
(L.  8,  Dig.,  Soluto  matrim.    XXIV,  3). 


The  Determination  of  Income  49 

For  example,  in  agricultural  accounts,  it  is  not  reasonable  to 
debit  to  the  product  of  one  year,  the  entire  cost  incurred  in 
manuring  the  land  during  that  year,  since  the  useful  effect  of 
this  will  last  for  several  years. — A  further  difficulty  arises  from 
the  fact  that  it  is  often  impossible  to  estimate  the  expenses  of 
production  at  the  time  of  the  sale  ;  where  this  estimation  can 
only  be  effected  at  some  subsequent  period,  or  when  the 
account  is  closed,  it  is  impossible  before  this  to  determine  the 
income.^  But  a  more  serious  difficulty  is  dependent  upon  the 
fact  that  it  is  often  absolutely  impossible  to  determine  the 
value  of  some  of  the  elements  from  which  the  income  proceeds. 
In  fact,  some  among  the  elements  of  the  technical  capital 
consumed,  which  have  to  be  subtracted  from  the  value  of  the 
product  in  order  to  obtain  the  income,  do  not  possess  a  market 
value.  This  phenomenon  is  especially  frequent  and  conspicu- 
ous in  agriculture,  where  stable  manure,  forage,  and  straw 
have  in  many  cases  no  market  price, 2  and  where  it  is  absolutely 
necessary  to  determine  by  various  artifices  the  specific  value 
of  the  nutritive  elements  (proteids,  fats,  and  non-nitrogenous 
extractives)  mixed  with  the  food,  but  not  previously  existing 
in  an  isolated  condition. ^  The  Hke  phenomenon  was,  however, 
exhibited  to  a  notable  extent  in  the  manufacturing  industry  of 
former  times,*  nor  does  it  tend  to  disappear  altogether  to-da5\ 
Some  writers  affirm  that  the  value  of  those  elements  which 
are  not  priced  in  the  market  is  to  be  determined  in  view  of 
their  utility  or  of  the  increment  of  product  which  results  from 
their  employment.  Others  are  of  opinion  that  it  should  be 
determined  with  reference  to  the  cost  of  the  articles  that 
might  be  substituted  for  these  elements  ;  thus,  for  example, 
in  this  view,  the  value  of  stable  manure  is  equivalent  to  the 
value  of  the  artificial  manure  which  might  be  substituted  for 
it.  Others  think,  and  more  correctly,  that  the  price  at  which 
the  elements  in  question  should  be  valued  does  not  correspond 
to  their  cost  of  acquisition,  nor  yet  to  their  current  price,  but 
to  the  effective    price    of    subsequent,  realisation  estimated 

*  Gomberg,  loc.  cit.,  p.  68. 

*  Waltz,  loc  cit.,  p.  103,  et  seq. 

'  Serpieri,  Intorno  ad  alcune  piii  controverse  valutazioni  agrarie,  Conegliano, 
1906. 

*  James  Steuart  (loc.  cit.,  II,  p.  174,  et  seq.)  already  referred  to  this. 


50  The  Economic  Synthesis 

when  the  balance-sheet  is  made  np.^  This  point  of  view  was 
aheady  expressed  in  more  precise  terms  by  Thaer,  who  said 
that,  in  the  case  of  elements  not  susceptible  of  direct  valuation, 
we  must  take  into  consideration  the  cost  necessary  for  their 
reproduction  at  the  time  when  the  determination  of  income 
is  effected. 2  In  this  case,  therefore,  the  principle  of  cost, 
properly  understood,  also  fully  suffices  to  meet  the  need ;  but 
it  is  no  less  true  that  the  concrete  appHcation  of  this  principle 
may  involve  serious  technical  difficulties,  which  may  postpone 
or  render  extremely  difficult  the  determination  of  the  income. 
These  difficulties  cannot  fail  to  become  accentuated  in  pro- 
portion as  the  income  becomes  further  evolved  ;  in  proportion, 
that  is  to  say,  as  the  association  of  labour  is  more  complex, 
the  technical  capital  more  considerable,  the  co-ordination  of 
the  productive  elements  more  intricate,  the  process  of  exchange 
vaster  and  more  articulated — ^in  a  word,  in  proportion  as  there 
increase  the  number  and  the  complexity  of  the  factors  upon 
whose  co-operation  the  income  itself  depends. 


§  2.  Determination  of  Income  by  the  Personal  Method. 

Hitherto  the  determination  of  the  total  income  has  been 
effected  by  ascertaining  in  the  first  place  the  annual  or 
periodical  product,  and  by  then  subtracting  from  this  a  number 
of  different  elements.  It  is  possible,  on  the  other  hand,  to 
proceed  by  the  inverse  method,  by  addition,  instead  of  by 
subtraction  ;  to  determine  first  of  all  the  individual  incomes, 
and  by  then  adding  these  together  to  ascertain  the  total 
income. 

The  first  thing  which  we  have  to  observe  is  that  the  indi- 
vidual incomes  which  must  be  added  together  in  order  to 
arrive  at  the  total  income  are  constituted  out  of  the  surplus 
of  the  individual  product  over  the  technical  capital  and  the 
subsistences  necessary  to  produce  it  ;  that,  in  other  words, 
all  that  quantity  of  wealth  which  is  consumption  of  capital 
is  not  income.  Thus,  in  a  life-annuity,  all  that  part  of  the 
annuity  which  exceeds  the  normal  profit  on  the  capital  ex- 
pended in  the  purchase  of  the  annuity,  is  not  income,  but 

1  Pantaleoni,  "  Giomale  degli  Economisti,"  March  and  April,  1904. 
*  Thaer,  Principes  raisonnes  d' agriculture,  Paris,  1811,  I,  pp.  205-6. 


The  Determination  of  Income  51 

consumption  of  the  capital  itself,  unless  the  surplus  in  question 
is  provided  at  the  cost  of  the  income  of  another  individual,  in 
which  case  we  have  merely  one  of  many  instances  of  the 
transfer  of  income  from  one  person  to  another — b>  matter  we 
shall  consider  very  shortly.  ^ 

What,  then,  are  the  incomes  which  must  be  added  together 
in  order  to  ascertain  the  total  income  ?  Although  a  more  or 
less  considerable  proportion  of  income  may  be  directly  received 
by  persons-at-law  or  by  corporations,  its  receipt  by  these  is 
provisional  merely,  and  it  comes  ultimately  to  be  divided 
among  single  individuals.  This  is  clearly  evidenced  in  the 
balance-sheets  of  limited  companies,  wherein  the  assets  are 
always  equal  to  the  liabilities,  because  the  surplus,  or  the 
income,  is  itself  a  liability  of  the  company  towards  the  indi- 
vidual stocldiolders.  Income  is  therefore  essentially  an  attri- 
bute of  individuals,  and  it  is  as  appertaining  to  individuals 
that  it  has  to  be  ascertained.  Thus,  the  income  of  a  Hmited 
company  is  equal  to  the  dividends  of  the  shareholders,  the 
debenture  holders,  the  directors,  etc.  ;  and  it  is  only  from 
considerations  of  expediency  that  we  determine  the  income 
of  the  company  as  a  whole,  leaving  out  of  account  the  indi- 
viduals among  whom  that  income  is  divided. 

Let  us  suppose,  in  the  first  place,  the  simplest  possible 
conditions,  in  which  each  individual  produces  his  own  sub- 
sistence, and  produces  in  addition  his  own  income,  which  he 
himself  consumes  ;  it  is  evident  that  here  the  total  income 
is  equal  to  the  sum  of  the  incomes  produced  by  the  single 
producers.  If,  on  the  other  hand,  one  portion  of  the  producers 
produces  subsistences  and  the  other  portion  produces  income, 
which  implies  that  a  part  of  the  subsistences  produced  by  the 
members  of  the  former  group  is  exchanged  for  a  part  of  the 

^  Fisher,  the  great  accountant  of  political  economy,  affirms  {Income,  pp.  Ill, 
249,  401)  that  the  portion  of  a  life  annuity  which  exceeds  the  ordinary  profit 
of  invested  capital,  and  which  is  not  accumulated  productively,  is  income, 
because  it  consists  of  articles  of  consumption.  It  appears  to  me  that  this 
view  is  unsound.  For,  in  fact,  these  articles  of  consumption  are  not  reproduced 
for  an  indefinite  period,  nor  can  they  be  consumed  without  affecting  the 
integrity  of  the  capitalised  property  ;  hence,  since  they  lack  the  essential 
characteristics  of  income,  they  cannot  form  part  of  this  category  of  wealth. 
It  follows  that  the  excess  of  the  life  annuity,  over  and  above  the  ordinary 
profit  of  invested  capital,  consumed  unproductively,  and  not  furnished  at 
the  expense  of  another  income,  is  not  income,  but  part  of  estate  or  of 
stock. 


52  The  Economic  Synthesis 

income  produced  by  the  members  of  the  latter  group,  the  net 
result  is  precisely  the  same  as  if  the  members  of  one  group 
and  of  the  other  produced  in  part  subsistences,  and  in  part 
income.  Hence,  in  such  a  case,  the  total  income  consists 
exclusively  of  the  incomes  produced  by  the  single  individuals  : 
it  may  be  directly,  in  the  form  of  income-products  consumed 
by  the  producers  themselves  ;  it  may  be  indirectly,  or  in  the 
form  of  products  which  are  exchanged  for  income-products. 
Supposing,  therefore,  that  there  contribute  to  production 
capital  and  productive  land  in  addition  to  labour,  and  sup- 
posing that  the  labour  obtains  nothing  more  than  a  subsistence, 
the  total  income  wiU  be  equal  to  the  sum  of  the  individual 
incomes  of  the  owners  of  the  capital  and  of  the  productive 
land.  For  in  truth,  given  three  owners  of  capital  or  productive 
land,  producing  and  consuming  respectively  quantities,  1,  2,  3, 
of  income-products,  either  obtaining  these  directly,  or  obtaining 
them  indirectly  in  the  form  of  other  products  which  they 
exchange  for  the  income-products,  it  is  evident  that  the  total 
income  is  precisely  equal  to  l+2-f-3,  that  is  to  say,  to  the 
sum  of  the  income-products  received  by  the  respective  indi- 
viduals. If,  now,  these  owners  of  productive  elements  are 
joined  by  new  owners  of  productive  elements,  or,  in  more 
general  terms,  if  they  are  joined  by  individuals  who  contribute 
in  any  way  to  the  work  necessary  for  the  increase  of  the 
product,  the  income  of  these  latter  constitutes  a  positive 
addition  to  the  income  hitherto  existent  and  previously 
determined.  Therefore  the  income  of  those  who  lend  to 
capitahst-entrepreneurs  a  part  of  productive  capital,  must  be 
added  to  the  total  income.  Thus,  again,  if  to  the  owners  and 
productive  capitalists  there  be  superadded  a  distributor,  or  a 
trader,  whose  work  is  necessary,  the  income  of  these  constitutes 
a  fit  and  proper  addition  to  the  total  income.  In  fact,  it  is  the 
intervention  of  the  distributor,  or  of  the  trader,  which  renders 
it  possible  for  each  producer  to  limit  his  activities  to  the  sole 
function  of  production,  and  to  a  specialised  production,  thus 
promoting  the  national  and  international  division  of  labour, 
which  determines  a  positive  increment  of  social  production.^ 

^  Concerning  this  question,  see  Brentano,  Ist  der  Handel  an  sich  Parassit  ? 
in  "  Die  Nation,"  January  28th,  1905,  and  the  controversy  with  Sombart, 
ibid.y  February  18th  and  March  4th.     But  Brentano  is  in  error  in  believing 


The  Determination  of  Income  53 

The  necessary  distributor  or  trader  therefore  effects  a  positive 
increase  in  the  product  ;  in  other  words,  if  we  subtract  from 
the  increment  due  to  their  activity  the  portion  which  consti- 
tutes their  subsistence,  the  remainder  represents  the  increase 
they  have  effected  in  the  income-products.  Hence,  also,  their 
income  must  be  added  to  that  of  the  owners  of  the  productive 
elements,  to  determine  the  totaUty  of  the  social  income. 
Certainly  it  is  not  always  easy  to  ascertain  the  respective 
individual  incomes  of  those  who  thus  effectively  contribute  to 
the  total.  Thus,  if  an  industry  obtain  part  of  the  requisite 
capital  by  means  of  a  loan,  it  is  possible  to  separate  the  income 
of  the  lenders  from  that  of  the  capitahst -entrepreneur  by 
means  of  the  distinction  between  the  debentures  and  the 
shares  ;  but  if  a  landowner  borrows  part  of  the  capital  neces- 
sary for  the  conduct  of  his  undertaking,  or  if  an  owner  or 
productive  capitalist  be  assisted  by  a  distributor  or  a  trader,  it 
is  not  always  easy  to  distinguish  the  share  of  the  income 
appertaining  to  those  of  the  first  group  from  that  which 
appertains  to  those  of  the  second  group  ;  and  it  is  more  con- 
venient to  specify  without  going  further  the  income  immedi- 
ately received  by  the  members  of  the  first  group,  apart  from 
the  relations  of  credit  or  trade  which  may  be  estabUshed. 

If  then,  we  have  under  consideration  an  economy  of  barter, 
we  may  say  that  the  social  income  is  equal  to  the  sum  of  the 
respective  incomes  of  the  owners  of  productive  elements 
(capital  and  land)  and  of  the  distributors  and  traders  necessary 
for  the  circulation  and  increase  of  social  production. 

If,  however,  we  have  under  consideration  a  monetary 
economy,  we  must  not  pay  attention  to  the  income -products 
in  kind,  but  to  the  monetary  value  of  these.  The  total  monetary 
income  is  made  up  of  the  sum  of  the  monetary  incomes  of 
those  who  contribute  to  the  creation  of  the  total  price  of  the 
income -products.  In  fact,  supposing,  as  always,  that  the 
income  is  fully  consumed  by  its  producers,  the  total  price  of 
the  income-products  is  divided  exclusively  among  those  who 
have  contributed  to  its  production,  and  goes  to  form  their 

that  the  productivity  of  commerce  suffices  per  se  to  imply  the  legitimacy  of 
the  profit  of  commercial  capital ;  since,  although  the  productivity  of  com- 
merce has  never  been  in  doubt,  the  necessity  and  the  legitimacy  of  the  profits 
of  commerce  are  open  to  dispute,  as  also  the  assignment  of  these  to  the  capital 
therein  invested. 


54  The  Economic  Synthesis 

individual  monetary  incomes  ;  for  which  reason,  the  sum  of 
the  monetary  incomes  of  those  who  have  produced  the  total 
price  of  the  income-products  is  mathematically  identical  with 
that  price.  Hence,  the  income  of  every  individual  who  con- 
tributes to  increase  the  price  of  the  income-products  must 
necessarily  be  added  to  the  sum  of  the  individual  monetary 
incomes  in  order  to  obtain  the  total  monetary  income.  It  is 
as  if  there  were  given  to  certain  individuals.  A,  B,  and  C,  a 
certain  numbers  of  counters,  60  to  A,  30  to  B,  and  10  to  C,  and 
we  assume  that  the  sum  of  these  counters  is  equivalent  to  the 
total  value  of  the  products  bought  by  A,  B,  and  C.  If,  now, 
a  fourth  individual,  D,  succeeds  in  increasing  by  10  the 
total  value,  it  foUows  that  the  sum  of  the  counters  possessed 
by  the  individuals  increases  by  ten,  or,  in  other  words,  that  the 
new-comer  gets  possession  of  10  new  counters  without  pre- 
judice to  those  possessed  by  the  other  three.  By  parity  of 
reasoning,  whenever  an  individual  contributes  to  increase  the 
price  of  the  income-products,  his  income  in  money  must 
increase  in  Hke  measure,  without  diminution  of  the  income  of 
the  others,  and  the  income  of  this  individual  must  be  added 
to  the  previously  ascertained  sum  of  individual  incomes. 

It  follows  from  these  considerations  that  the  income  of 
individuals  who  have  nowise  contributed  to  increase  the 
product  in  kind  must  be  added  to  the  sum  of  the  monetary 
incomes  whenever  the  individuals  in  question  have  contributed 
to  increase  the  price  of  the  income-products.  Thus,  if  the 
price  of  a  given  income-product  rises  in  consequence  of 
a  deficiency  in  supply,  or  in  consequence  of  increased 
demand,  the  total  price  of  the  income-product  increases,  and 
there  must  ensue  in  equal  measure  an  increase  in  the  other 
term  of  the  equation,  that  is  to  say,  in  the  sum  of  the 
individual  monetary  incomes.  The  increment  of  monetary 
income  received  by  the  producers  whose  product  thus  obtains 
a  higher  price,  ought  therefore  to  be  added  to  the  sum  of 
the  pre-existent  incomes,  notwithstanding  the  fact  that  this 
increment  does  not  correspond  to  any  increment  in  the  total 
quantity  of  income  in  kind,  but  represents  merely  a  change  in 
the  mode  of  its  distribution  among  the  respective  holders,  a 
dilution  of  the  existing  income  among  a  larger  number  of 
participants,  something  taken  away  from  the  previous  re- 


The  Determination  of  Income  55 

cipients  of  income  for  the  benefit  of  the  privileged  recipient. 
To  continue  the  example  of  the  counters,  if  there  be,  ceteris 
paribus,  an  increase  in  the  number  of  counters  representing 
the  value  of  a  given  income -product,  there  is  an  increase  also 
in  the  total  number  of  counters  which  represent  the  value  of 
the  total  income-product ;  and  since  the  quantity  of  incomes 
is  equal  to  the  sum-total  of  counters  allotted,  it  is  necessary 
that  these  additional  counters  should  be  added  to  the  sum 
of  the  individual  incomes.  This  additional  quantity  of  counters 
goes,  then,  to  increase  the  income  of  the  producers  of  the 
favoured  commodity,  whereas  the  quantity  of  counters 
possessed  b}^  the  others  remains  constant ;  and  from  this  it 
follows  that  the  former  can  get  possession  of  an  additional 
quantity  of  income-products,  leaving  a  proportionately  smaller 
quantity  for  the  other  producers. 

Conversely,  if  a  given  product  falls  in  price  owing  to  excess 
of  supply,  the  total  price  of  the  income-products,  ceteris  paribus, 
will  also  fall,  and  there  will  be  a  proportionate  diminution  in 
the  sum  of  the  individual  monetary  incomes.  Whence  the 
monetary  income  of  the  less  fortunate  producer  diminishes, 
and  may  fall  to  zero,  or  become  negative  ;  but  if  the  quantity 
of  income-products  remains  constant,  or  increases,  the  total 
income  in  kind  remains  constant,  or  increases  ;  and  the  only 
result  is  that  the  first  producer  wiU  be  able  to  get  possession 
of  a  lesser  quantity,  or  of  none  at  aU,  and  must  leave  for  the 
other  producers  a  proportionately  larger  quantity.  ^ 

From  this  it  is  evident  that  a  producer  who,  in  the  absence 
of  a  process  of  exchange,  would  obtain  no  more  than  a  sub- 
sistence, may  very  well  obtain  an  income  in  consequence  of 
exchange,  since  in  this  way  it  may  happen  that  his  product  wiU 
increase  in  value  so  as  to  exceed  the  value  of  technical  capital 
and  subsistence.  Conversely,  a  producer  who,  in  the  absence 
of  a  process  of  exchange,  would  obtain  a  positive  income,  may 
very  weU  obtain,  when  exchange  intervenes,  no  income  at  all, 
or  a  negative  income,  since  it  may  happen  that  the  value  of  his 
product  may  decHne  below  the  value  of  technical  capital  and 
subsistence. 

From  the  previous  considerations  we  may  deduce,  conversely, 
that  every  increase  in  the  total  monetary  income  must  increase 
^  De  Bomouill,  loc,  cit.,  p.  186. 


56  The  Economic  Synthesis 

in  like  measure  the  total  price  of  the  income-products.  Return- 
ing to  the  example  of  the  counters,  from  the  moment  the  sum  of 
the  counters  representing  the  total  income  is  equal  to  the  sum 
of  the  counters  representing  the  total  price  of  the  income- 
products,  every  increase  of  the  former  quantity  must  neces- 
sarily increase  the  latter.  This  is  what  actually  happens  in 
all  periods  of  increasing  speculation.  In  fact,  in  such  periods, 
the  owners  of  shares  sell  at  increased  prices  and  therewith 
increase  their  own  purchasing  powers  expressed  in  money, 
without  therefore  diminishing,  for  the  moment  at  least,  that  of 
the  buyers  of  these  shares.  Hence  the  total  monetary  income 
rises,  and  proportionally  there  must  rise  also  the  total  price 
of  the  income-products.^ 

An  important  consequence  deducible  from  these  considera- 
tions is  that  the  monetary  income  of  an  individual  ought  or 
ought  not  to  be  added  to  that  of  the  others  in  order  to 
ascertain  the  total  monetary  income,  according  as  the  method 
varies  by  which  is  ascertained  the  value  of  the  income-products. 
In  fact,  if  we  take  into  account  only  the  wholesale  price  of 
the  income-products,  it  is  evident  that  the  total  monetary 
income  will  consist  exclusively  of  the  monetary  incomes  of  the 
owners  of  the  productive  elements  and  of  those  of  the  whole- 
sale traders.  If,  on  the  other  hand,  the  retail  price  forms  the 
basis  of  our  estimate,  in  our  calculation  of  the  total  monetary 
income  we  certainly  ought  to  include  also  the  incomes  of  the 
retail  traders,  inasmuch  as  their  incomes,  forming  part  of  one 
term  of  the  equation  (the  total  value  of  the  income-product) 
must  also  form  part  of  the  other  term  of  the  equation  (the  sum 
of  the  monetary  incomes). 

We  may  go  further  than  this.  The  income  of  the  State  (an 
improper  expression,  since  we  have  previously  pointed  out 
that  income  is  an  essentially  individual  attribute),  in  so  far 
as  it  is  derived  from  an  increase  in  the  value  of  the  products, 
must  be  added  to  the  total  income.  In  other  words,  if  in 
determining  the  price  of  the  products  we  take  into  account 
the  rise  in  their  value  resulting  from  indirect  taxation,  we 
ought  to  add  the  }deld  of  these  indirect  taxes  to  the  sum  of 
the  individual  incomes  in  order  to  ascertain  the  total  income. 
We  have,  in  fact,  seen  that  the  total  price  of  the  income- 
^  Cochut,  "  Revue  des  deux  mondes,"  December,  1883. 


The  Determination  of  Income  57 

products  is  equal  to  the  sum  of  the  individual  monetary 
incomes,  and  that  for  this  reason  in  proportion  as  the  first 
figure  increases,  the  second  must  also  increase.'  Now  the  State, 
by  means  of  the  indirect  taxes,  reaUy  plays  the  part  of  a 
retail  trader  who  puts  a  higher  price  upon  the  products  in 
which  he  deals,  and  therewith  increases  the  total  price  of  the 
income-products.  Hence  the  income  which  the  State  derives 
from  this  increase  of  price  ought  to  be  added  to  the  sum  of  the 
individual  monetary  incomes. 

For  this  reason,  according  as  the  income-product  comes 
under  our  consideration  within  the  area  of  production,  or  is 
followed  by  us  into  the  hands  of  the  wholesale  merchant,  or 
further  still  into  those  of  the  various  retail  dealers,  or  finally 
in  its  passage  through  the  customs  or  excise — ^so  also  do  we 
find  that  the  sum  of  the  monetary  incomes  undergoes  a  pro- 
gressive increase,  although  in  the  last  two  instances  the 
quantity  of  income  in  kind  remains  unchanged.  The  number 
of  counters  which  gives  the  right  to  a  share  in  the  total  income- 
product  increases,  whereas  the  quantity  of  the  product  remains 
unchanged  ;  hence  the  share  in  the  product  which  remains  for 
each  of  the  participants  is  proportionately  diminished.  The 
addition  of  new  monetary  incomes  effects  a  correlative 
diminution  of  the  individual  incomes  in  kind,  or  a  dilution  of 
the  income  in  kind  by  its  distribution  among  a  larger  number 
of  participants. 

But  the  sum  thus  variously  determined  does  not  yet  consti- 
tute the  entity  of  the  total  income,  since  in  order  to  obtain 
this  it  is  necessary  to  subtract  from  the  sum  in  question  all 
that  quantity  of  the  product,  or  the  value  of  this  quantity, 
which  passes  out  of  the  hands  of  the  recipients  of  income  with- 
out creating  an  income  for  others.  In  the  first  place  we  have 
here  to  consider  a  fraction  of  that  sum,  more  or  less  constant 
from  one  period  to  another,  which  is  saved  productively  or 
unproductively,  explicitly  or  impHcitly,  in  the  form  of  in- 
surance. This  quantity  crystallises  itself  as  technical  capital 
and  subsistences,  and  "pex  se  ceases  to  form  part  of  income 
although  it  may  produce  a  new  income  in  future.  The  same 
may  be  said  about  that  part  of  the  sum  previously  determined 
which  is  employed  by  the  recipients  of  income  in  the  mainten- 
ance of  servants  or  other  unproductive  labourers  receiving 


58  The  Economic  Synthesis 

subsistences,  hence  that  wealth  also  which  is  converted  into 
subsistence  is  for  that  very  reason  not  income.  Further,  there 
is  a  part  of  that  sum  which  goes  to  make  up  non-periodic 
accruements,  namely,  that  which  is  taken  from  its  immediate 
recipients  by  thieves,  or  is  distributed  by  these  recipients  in 
charity,  or  used  by  them  in  gambHng.  It  is  evident  that,  if  the 
wealth  that  is  stolen  consists  of  products  of  consumption,  the 
theft  diminishes  precisely  by  this  amount  the  income  of  the 
person  robbed.  But  it  cannot  be  said  that  this  diminution  in 
the  income  of  the  person  robbed,  effects  conversely  a  cor- 
relative increase  in  the  income  of  the  thief,  inasmuch  as  the 
gain  of  the  latter  lacks  the  characteristic  of  periodicity  which 
is  essential  to  income.  Therefore  the  whole  quantity  of  wealth 
which  passes  into  the  hands  of  thieves  must  be  subtracted, 
not  merely  from  individual  income,  but  also  from  social  income. 
What  is  said  of  theft  appHes  no  less  to  that  officially  organised 
theft  which  is  known  as  war.  Even  when  war  does  not  involve 
the  plunder  of  all  the  sources  of  income,  and  confines  itself  to 
taking  from  the  vanquished  a  quantity  of  products  of  con- 
sumption, it  effects  a  diminution,  not  only  of  individual 
income,  but  also  of  total  income,  for,  during  the  period  through- 
out which  it  acts,  it  diminishes  the  income  of  the  vanquished 
without  increasing  the  income  of  the  victors.  Similarly, 
gambling  and  charity  deprive  the  losers  or  the  donors  of  a 
portion  of  their  income,  without  effecting  for  the  winners  or 
beneficiaries  anything  more  than  a  casual  and  non-periodic 
gain  which  is  not  in  itself  income.  ^  In  this  way  all  the  fractions 
of  the  sum  previously  determined  which  undergo  transforma- 

*  There  are,  indeed,  certain  cases  in  which  the  accruements  of  theft,  gam^ 
bUng,  and  charity,  present  a  periodic  rhythm.  Thus,  without  going  so  far  back 
as  the  thieves'  guild  of  Bagdad,  which  in  the  tenth  century  of  our  era  effected 
regular  and  enormous  earnings,  certain  Neapolitan  pickpockets,  certain 
fashionable  sharpers  of  Nice  and  Spa,  not  to  mention  the  gambling  establish- 
ment of  Monte  Carlo,  effect  to-day  periodic  accruements.  There  are  beggars 
in  London  who  receive  on  the  average  as  much  as  thirty  shillings  a  day  ;  in 
Paris,  the  mendicants  outside  the  church  of  the  Madeleine,  when  they  retire, 
sell  their  pitches  to  their  successors,  just  as  a  doctor  sells  his  practice  ;  in 
Turin,  a  beggar  on  the  steps  of  the  church  of  the  Consolata  has  let  his  station 
on  hire  to  a  colleague  for  the  sum  of  ten  shilHngs  a  day.  Still,  the  periodicity 
of  such  accruements  is  transitory  and  ephemeral.  More  strictly  periodical 
is  the  income  of  charitable  institutions  ;  but  the  income  of  such  institutions 
is  merely  a  halting-place  of  wealth  on  its  way  into  the  hands  of  the  benefi- 
ciaries. If,  therefore,  we  consider,  as  we  should,  the  wealth  of  the  charitable 
institutions  with  an  eye  to  its  ultimate  destination,  we  cannot  fail  to  see  that 
it  is  a  non-periodic  accruement  which  is  not  per  «e  income. 


The  Determination  of  Income  59 

tion  into  subsistence,  technical  capital,  and  non-periodic 
accrue  me  nts,  must  be  subtracted  from  the  given  sum  in  order 
to  ascertain  the  total  income.  Thus  only  can  be  maintained 
the  equivalence  between  the  total  monetary  income  and  the 
total  price  of  the  income-products.  In  fact,  for  every  segment 
of  the  income-products  which  ceases  to  be  such,  and  undergoes 
a  transformation  into  products  which  are  not  income,  there 
occurs,  ceteris  paribus,  a  diminution  in  the  total  value  of  the 
income-products.  Hence,  in  order  that  the  equivalence  may 
persist,  it  is  necessary  that  the  monetary  value  of  the  total 
income  should  diminish  in  equal  degree.  This  necessitates 
that  all  the  fractions  of  the  income  which  are  employed  in 
providing  subsistences,  technical  capital,  and  non-periodic 
accruements,  should  cease  to  form  part  of  the  total  income. 

Thus,  the  total  income  is  equal  to  the  sum  of  the  accrue- 
ments periodically  and  immediately  received  by  those  who 
contribute  to  the  creation  of  the  income-product  or  of  its  price, 
subtracting  the  part  which  is  expended  in  technical  capital  or 
subsistences  (productive  or  unproductive),  or  which  constitutes 
non-periodic  accruements.  But  there  is  another  portion  immedi- 
ately received  by  these  individuals  which  is  disposed  of  by  them 
in  order  to  create,  for  the  benefit  of  other  persons,  periodical 
accruements  which  are  not  subsistences.  Of  such  a  character 
is  that  part  of  income  which  goes  to  provide  a  pension  or  a 
hfe-annuity  for  the  benefit  of  a  third  party.  Thus,  for  example, 
when  a  hfe  insurance  company  assigns  a  hfe-annuity  to  anyone, 
what  happens  is  that  a  portion  of  the  income  of  the  society 
itself,  or  of  its  shareholders,  is  transferred  to  the  assured. 
Such  again  is  that  part  of  income  which  provides  the  remunera- 
tion of  the  unproductive  labourers  whose  position  is  superior 
to  that  of  the  working-capitalist  ;  that  is  to  say,  of  the 
chents  or  vassals  of  former  times,  and,  in  our  own  day,  medical 
practitioners,  engineers,  go-betweens,  confidants,  lawyers, 
priests,  ofiicials,  magistrates,  journahsts,  courtiers.  Now  in 
all  these  cases  we  have  merely  the  transference  of  certain 
concrete  quantities  of  income  from  one  person  to  another,  and 
such  transference  neither  diminishes  nor  increases  the  total 
quantity  of  income  previously  determined  ;  hence  we  must 
take  no  account  of  it  in  our  determination  of  the  total  income. 
If,  indeed,  the  owner  of  a  productive  element,  providing  him 


6o  The  Economic  Synthesis 

directly  with  a  certain  income,  spends  a  portion  of  that  income 
upon  a  medical  or  legal  consultation,  or  if,  like  one  of  the 
characters  in  Heine's  Ratcliff,  he  exchanges  banknotes  for 
musical  notes,  or  if  he  buys  other  immaterial  pleasures,  all  he 
effects  is  the  transfer  of  a  part  of  his  income,  or  of  the  wealth 
of  which  this  is  composed,  to  an  unproductive  labourer.  The 
actual  fact  we  have  to  recognise  is  merely  the  transference  of 
a  given  portion  of  income  from  the  owner  of  the  productive 
element  to  the  unproductive  labourer — ^a  transference  which 
nowise  affects  the  pre-existent  total  quantity  of  income. 
Undoubtedly,  the  owner  of  the  productive  element  who  thus 
deprives  himself  of  a  portion  of  his  income  does  not  do  this 
gratuitously,  but  obtains  in  exchange  immaterial  pleasures 
sometimes  more  precious  than  those  which  material  goods 
can  provide.  But  since  the  income  consists  of  material 
products,  the  acquirement  of  these  immaterial  gains  by  the 
recipient  of  income  effects  no  increase  in  his  income,  and  cannot 
cancel  the  subtraction  which  this  has  sustained.  The  income 
of  the  owner  of  the  productive  element  remains  diminished 
to  the  extent  to  which  the  income  of  the  unproductive  labourer 
is  increased  ;  and  therefore  the  existence  and  the  reward  of 
these,  although  it  does  not,  as  in  the  cases  last  considered, 
diminish  the  total  quantity  of  income,  nevertheless  cannot 
in  any  way  increase  that  quantity. 

All  that  has  been  said  apphes  to  the  income  of  unproductive 
labour,  whatever  the  kind  of  that  labour.  Hence  it  appHes  to 
that  unproductive  labour  whose  function  is  ultimately  essential 
to  insure  the  persistence  of  the  income.  Similarly,  it  applies 
to  that  unproductive  labour  which  is  organised  by  collective 
entities  or  institutions  instead  of  by  private  individuals.  Thus 
the  tax  paid  by  the  recipient  of  income  to  the  State  or  to  the 
Church,  whether  paid  in  the  form  of  direct  or  of  indirect  taxes, 
represents  merely  a  portion  of  the  tax-payer's  income  which 
is  taken  from  him  either  temporarily  or  permanently,  and  in 
the  latter  case  may  create  an  income  for  another.  If  the  State 
or  the  Church  pays  back  to  the  tax-payer,  directly  or  indirectly, 
the  amount  of  the  tax,  or  its  equivalent,  in  products  of  con- 
sumption, the  income  of  the  tax-payer  undergoes  no  diminu- 
tion, but  simply  a  transformation.  If  the  State  or  the  Church 
makes  periodical  use  of  the  yield  of  the  taxes  in  the  purchase 


The  Determmatioii  of  Income  6i 

of  objects  which  are  not  objects  of  individual  consumption 
(in  the  purchase  of  cannon,  for  instance),  or  in  technical 
capital  or  subsistences,  there  results  in  reahty  a  diminution, 
not  only  of  individual  income,  but  also  of  total  income.  If, 
finally,  the  State  or  the  Church  makes  use  of  the  amount 
raised  by  the  tax  to  provide  income  for  certain  unproductive 
labourers,  the  process  under  consideration  ultimately  resolves 
itself  into  the  transference  of  a  portion  of  income  from  the 
owner  of  the  productive  or  unproductive  elements  to  the 
aforesaid  unproductive  labourers.  It  foUows  that  the  portion 
of  income  which  the  tax-payers  hand  over  to  the  State  (and 
the  same  may  be  said  of  the  Church),  and  which  remains 
income,  merely  traverses  the  State  Treasury,  soon  leaving  this 
to  form  the  income  of  other  individuals.  For  this  reason,  the 
very  expression  "  the  income  of  the  State  "  is  an  improper 
one,  since  it  applies  only  to  wealth  in  a  provisional  stage,  and 
does  not  foUow  it  up  to  its  ultimate  end,  which  is  always  the 
individual.  Therefore,  if  we  have  said  that  in  calculating  the 
total  income  we  should  take  into  account  the  income  received 
by  the  State  in  the  form  of  indirect  taxes,  it  is  necessary  to 
point  out  that  such  an  accruement  constitutes  State  income 
only  in  a  provisional  sense,  inasmuch  as  it  ultimately  under- 
goes transformation  into  a  number  of  individual  incomes. 
That  is,  it  is  essential  to  include  as  forming  part  of  the  total 
income  the  incomes  also  of  unproductive  labourers  constituted 
out  of  the  yield  of  the  indirect  taxes  which  raise  the  price  of  the 
income-products  ;  whereas  the  part  of  that  yield  which  is 
consumed  by  the  State  in  products,  represents  a  part  of  the 
income-product,  or  of  its  value,  which  ceases  to  be  income  ;  and 
that  part  which  is  restored  to  the  recipients  of  income  is  an 
addition  to  their  income  in  money,  which  thus  increases  in 
equal  measure  with  the  integral  price  of  the  income-products, 
leaving  unaltered  the  income  in  kind. 

All  that  has  been  said  of  unproductive  labour  applies  equally 
well  to  unproductive  capital  and  unproductive  land.  The 
owners  of  productive  elements  must  certainly  sacrifice  a 
portion  of  their  own  income  in  the  form  of  rent,  or  of  the 
interest  on  public  debt,  on  capital  of  consumption,  or  on 
trading  capital ;  and  they  must  further  spend  a  portion  of 
their  own  income  in  railway-tickets,  that  is  to  say  in  paying 


62  The  Economic  Syiithesis 

the  interest  on  the  capital  invested  in  railways  ;  but  these 
payments  merely  represent  a  transference  of  a  part  of  the 
income  from  its  owner  to  the  owner  of  the  house,  or  of  the 
capital  lent  to  the  State,  or  of  the  capital  of  consumption, 
speculative  capital,  or  railway  share  capital,  as  the  case  may 
be,  without  the  total  quantity  of  income  undergoing  thereby 
either  diminution  or  increase.  What  is  paid  to  the  owners  of 
unproductive  elements  or  to  the  unproductive  labourers  does 
not  constitute  an  addition  to  the  total  income,  except 
when  such  payments  are  effected  at  the  cost  of  subsistence. 
Thus,  the  income  of  the  owner  of  a  house  which  is  rented 
by  labourers,  the  income  of  a  retailer,  a  money-lender,  or 
a  doctor,  being  the  incomes  derived  from  the  slender 
purses  of  the  workers,  represent  a  quantity  of  wealth 
taken  from  subsistence  to  be  transformed  into  income  ;  in 
other  words,  it  no  longer  represents  a  simple  transference  of 
pre-existent  income  from  one  individual  to  another,  but  a 
positive  increment  to  the  total  income.  We  have  here,  sub- 
stantially, a  process  the  reverse  of  that  which  occurs  in  saving  ; 
inasmuch  as,  whereas  saving  represents  the  transformation  of 
a  part  of  income  into  subsistence,  in  the  cases  now  under  con- 
sideration we  have  to  do  with  the  partial  transmutation  of 
subsistence  into  income.^ 

Putting  aside,  however,  the  case  in  which  the  unproductive 
elements  obtain  an  income  at  the  expense  of  subsistences, 
the  income  received  by  these  unproductive  elements  is  merely 
a  part  of  the  income  previously  received  by  the  owners  of 
productive  elements,  and  this  transference  effects  a  proportion^ 
ate  diminution  in  the  income  of  these  latter,  so  that  the  total 
income  remains  unchanged.  It  follows  from  this  that  every- 
thing which  diminishes  or  annuls  the  tribute  paid  to  the 
owners  of  unproductive  elements  by  those  who  have  need  of 
them,  proportionately  increases  the  income  of  these  latter. 
Thus,  if  a  co-operative  credit  society  lowers  the  rate  of  interest 
payable  by  the  borrowers,  there  is  thereby  lessened  the  sub- 
traction which  their  income  has  to  undergo  for  the  benefit  of 

^  Ricardo  {Worlcs,  p.  87)  wrongly  includes  in  national  capital  the  house 
rented  to  a  workman,  whereas  this  is  in  any  case  nothing  but  individual 
capital  which  obtains  an  income,  not  by  way  of  production,  but  by  the 
annexation  of  what  is  earned  by  another.  Smith  {loc.  cit.,  pp.  222-3)  is 
nearer  the  truth,  for  he  includes  houses  among  stock. 


The  Determination  of  Income  63 

the  lenders,  and  the  real  income  of  the  borrowers  is  conse- 
quently increased.  A  consumers'  co-operative  society,  again, 
increases  the  total  income  of  the  members  of  the  society  by 
all  that  quantity  of  wealth  which  would  otherwise  be  trans- 
ferred to  trading  capital.  A  co-operative  building  society, 
diminishing  and  ultimately  annuUing  the  payment  made  by 
the  tenant  to  the  house-owner,  increases  the  income  of 
the  former.  One  who  buys  wholesale  has,  ceteris  paribus, 
an  income  greater  than  that  of  one  who  buys  retail ;  and 
so  on. 

Making  use  of  a  distinction  originally  due  to  Hermann, 
although  from  an  outlook  somewhat  different  from  his,  it  may 
be  said  that  the  income  immediately  received  by  those  who 
contribute  to  create  the  product  or  the  price  of  the  product,  in 
other  words  the  income  of  the  owners  of  productive  elements, 
is  original  income  ;  whereas  the  income  assigned  to  the  owners 
of  unproductive  elements,  or  to  unproductive  labourers,  is 
no  more  than  a  derivative  income,  or  a  transference  from  the 
members  of  the  former  group  of  that  which  is  directly  received 
by  them  to  the  owners  of  unproductive  elements.  Now,  the 
total  income  is  equal  to  the  sum  of  the  original  incomes  ;  and 
therefore  the  quantity  of  the  derivative  incomes  must  be 
excluded  from  the  calculation  of  the  total  income,  or  must  be 
subtracted  from  this  total  in  so  far  as  it  has  been  included  in 
the  calculation.  As  the  outcome  of  these  considerations,  we 
can  further  distinguish  the  apparent  or  nominal  total  income 
from  the  real  total  income.  The  former  is  obtained  by  adding 
together  the  individual  incomes  directly  received  by  all  the 
owners  of  productive  or  unproductive  elements  and  by  un- 
productive labourers  ;  the  latter  is  obtained  by  adding  together 
the  individual  incomes  directly  received  by  the  owners  of 
productive  elements.  (In  both  cases  it  is  understood  that  we 
have  to  subtract  that  portion  of  income  which  is  saved,  and 
that  also  which  is  transformed  into  non-periodic  accrue ments.) 
It  is  by  this  criterion  that  we  can  distinguish  between  the 
apparent  individual  income  and  the  real  individual  income. 
The  former  consists  of  the  quantity  of  wealth  which  is  directly 
received  by  the  individual  proprietors  of  productive  or  un- 
productive elements  ;  the  latter  is  the  income  which  they 
ultimately  consume,  or,  in  other  words,  that  which  remains 


64  The  Econo7nic  Sy7ithesis 

to  them  after  they  have  paid  unproductive  owners  or  un- 
productive labourers. 

Now,  if  it  be  supposed  that  the  various  individual  incomes 
are  distributed  in  identical  proportions  as  between  products 
and  the  services  of  unproductive  elements,  the  apparent 
individual  incomes  will  bear  hke  ratios  to  the  real  individual 
incomes.  Thus  if  A  and  B,  owners  of  productive  elements, 
directly  and  respectively  receive  incomes  of  10,000  and 
8000  francs,  whilst  C,  an  unproductive  labourer,  receives  an 
income  of  7000  francs,  the  three  nominal  incomes  bear  the 
respective  ratios  10  :  8  :  7,  that  is  to  say,  A  has  \%,  B  if^,  and 
C  oV,  of  the  total  income. — But  if  the  incomes  of  A,  B,  and  C 
are  employed  to  the  extent  of  28%  in  the  payment  of  the 
services  of  unproductive  elements,  A  spends  2800  francs  upon 
services  and  7200  upon  products  ;  B  spends  2240  upon  services 
and  5760  upon  products  ;  C  1960  upon  services  and  5040  upon 
products.  The  three  real  individual  incomes  are,  therefore, 
7200,  5760,  5040  francs,  respectively  ;  that  is,  they  respectively 
represent  if,  ^s,  and  A  of  the  total  real  income  ;  in  other 
words,  their  mutual  ratios  are  the  same  as  those  of  the  re- 
spective nominal  incomes.  When,  on  the  other  hand,  the 
different  individual  incomes  are  distributed  in  different  ratios 
as  between  products  and  services,  the  inferiority  of  the  real 
income  in  relation  to  the  apparent  income  is  greater  in  those 
incomes  of  which  a  larger  proportion  is  consumed  in  payment 
for  services.  Thus,  to  continue  the  previous  example,  if  A 
pays  3000  francs  for  services,  and  B  2040  francs,  the  real 
income  of  A  is  7000  francs  and  that  of  B  is  5960  francs  ;  that 
is,  the  real  income  of  A  is  30%  less  than  his  apparent  income, 
whereas  the  real  income  of  B  (who  devotes  a  lesser  proportion 
of  his  income  to  the  payment  of  services)  is  only  25-5%  less 
than  his  apparent  income.  Whereas,  then,  where  consumption 
of  income  is  similarly  distributed  as  between  products  and 
services,  the  individual  real  incomes  constitute  hke  proportions 
of  the  total  real  income  with  those  in  which  the  corresponding 
apparent  incomes  stand  to  the  total  apparent  income — ^where 
we  have  consumption  of  income  diversely  distributed,  the  real 
incomes,  inasmuch  as  a  larger  proportion  of  these  is  consumed  in 
payment  for  services,  stand  in  a  lower  ratio  to  the  total  real 
income    than   that    in   which    the    corresponding   apparent 


The  Determination  of  Income  65 

incomes  stand  in  relation  to  the  total  apparent  income  ; 
whereas,  the  converse  is  the  case  in  regard  to  those  incomes  of 
which  a  larger  proportion  is  consumed  in  payments  for 
products.  In  fact,  whilst  the  apparent  income  of  A  (10,000) 
represents  ^  of  the  total  apparent  income,  the  real  income  of 
A  (7000)  represents  %i  of  the  total  real  income  (18,000)  ;  and 
whilst  the  apparent  income  of  B  (8000)  represents  -iz  of  the 
total  apparent  income,  the  real  income  of  B  (5960)  represents 
II  of  the  total  real  income.  In  this  way  it  results  that  A,  who 
consumes  a  larger  proportion  of  services,  participates  to  a  less 
extent  in  the  total  real  income,  and  B  to  a  greater  extent,  than 
the  comparative  shares  of  each  in  the  total  apparent  income. 

Nevertheless,  even  where  the  individual  incomes  are  em- 
ployed in  diverse  proportions  in  the  consumption  of  products 
and  in  the  payment  for  services,  this  divergence  is  never,  nor 
can  ever  be,  so  considerable  as  to  make  the  proportions  between 
the  various  apparent  incomes  diverge  radically  from  the  ratios 
between  the  various  real  incomes.  Now  the  fundamental  datum 
which  it  is  necessary  to  know  in  order  to  attain  to  clear  views 
regarding  the  distribution  of  wealth,  is  not  the  absolute 
amounts  of  the  individual  incomes,  but  the  ratios  between 
these,  and  since  these  ratios  are  substantially  the  same  in  the 
case  of  nominal  incomes  and  in  the  case  of  real  incomes,  know- 
ledge of  the  nominal  incomes  is  sufficient  to  enable  us  to  attain 
to  a  clear  general  view  of  the  fundamental  lineaments  of  the 
distribution  of  wealth.  For  this  reason,  the  incomes  statisti- 
cally recorded,  however  erroneously  inflated  by  all  that  part 
of  income  expended  in  payment  for  services,  may  without 
serious  error  be  made  the  foundation  of  a  study  of  the  distribu- 
tion of  wealth  or  of  the  relative  well-being  of  various  individuals 
and  of  various  classes. 

We  may  sum  up  the  argument  by  saying  that  the  net 
product,  after  the  subtraction  of  the  part  saved,  or  constituting 
non-periodic  accrue ments,  is  directly  received  by  the  owners 
of  productive  elements,  who  then  transfer  a  more  or  less  con- 
siderable part  to  the  owners  of  unproductive  elements  and  to 
immaterial  labourers,  productive  or  unproductive,  who  in  their 
turn  transfer  a  part  to  others,  and  so  on.  The  definite  out- 
come of  this  series  of  processes  is  that  the  respective  individuals 
become  periodically  possessed  of  a  certain  quantity  of  product 


66  The  Economic  Synthesis 

which  they  consume  integrally  and  personally.  Now,  that 
quantity  of  product  which- is  periodically  and  dej&nitely  con- 
sumed by  the  respective  owners  of  productive  and  unpro- 
ductive elements,  or  by  those  engaged  in  immaterial  labour, 
productive  or  unproductive,  consumed  by  these  individuals 
without  injury  to  the  integrity  of  their  capital  or  without 
affecting  the  renewal  of  their  remuneration,  constitutes  their 
individual  income.  The  sum  of  the  individual  incomes  thus 
determined, constitutes  the  total  income.  ^  Thus,  to  ascertain  the 
total  income  it  is  proper,  either  to  leave  out  of  count  the  income 
of  unproductive  owners  and  unproductive  labourers,  or  else  to 
subtract  at  the  outset  from  the  income  directly  received  by  the 
owners  of  productive  elements,  the  quantity  of  wealth  which 
is  transferred  by  them  to  the  owners  of  unproductive  elements 
and  to  the  unproductive  labourers. ^ 

^  It  may  be  objected  that  according  to  this  argument  individual  income 
becomes  something  altogether  indeterminable,  since  we  cannot  ever  know 
whether  a  given  quantity  of  wealth  actually  possessed  by  any  individual  is 
income  at  all.  There  is  no  doubt  that  the  calculation  of  individual  incom.e 
cannot  be  made,  unless  each  part  of  the  net  product  received  by  the  individual 
has  been  definitively  consumed.  But  this  admission  of  the  existence  of  prac- 
tical difficulties  cannot  in  any  way  change  the  theoretical  view  of  the  matter. 

It  may  further  be  said,  in  the  light  of  these  considerations,  that  if  all 
persons  expended  their  own  incomes  in  payment  for  services,  there  would  be 
no  more  income  at  all.  The  answer  to  this  is  that  the  hypothesis  that  the 
social  income  should  be  totally  consumed  in  payment  for  services,  is  per  se 
an  irrational  one  ;  for  the  very  fact  that  there  is  a  quantity  of  products  of 
consumption  which  are  not  subsistence,  and  are  required  and  consumed, 
effectively  proves  that  income  is  ultimately  consumed  in  products.  At  the 
most  we  may  admit  that  the  income  of  a  given  individual  may  hypothetically 
be  consumed  exclusively  in  payment  for  services,  and  thus  become  annulled  ; 
but  this  hypothesis  is  also  irrational,  for  the  recipient  of  income,  if  he  wishes 
to  live  and  to  enjoy,  must  necessarily  employ  a  part  of  his  income  in  the  buying 
of  products. 

2  Of  the  opposite  opinion  are  the  following  writers  :  Storch,  loc.  cit.,  pp.  834, 
854,  et  seq.  ;  Marx,  Mehrwerth,  I,  pp.  382-4  ;  Hermann,  loc.  cit.,  pp.  594-7  ; 
Schmoller,  Emkommen  ;  Marshall,  Principles,  I,  II,  5,  §3  ;  D'Aulnis  de 
Bourouill,  loc.  cit.,  p.  182  ;  Soetbeer,  Umjayig  und  Vertheilung  des  Volks- 
einkommens,  Leipzig,  1879,  pp.  67-71  ;  Pantaleoni,  Ammontare  probabile 
della  richezza  privata  in  Itulia,  Rome,  1884,  pp.  179-80  ;  Jager,  Die  Qrund- 
legmxg  der  theoretische  National  oekonomie  durch  Adam  Smith,  "  Zeitschrift  fiir 
Volkswirtschaft,"  1900 ;  Klein wachter,  Einkommen,  pp.  8,  12,  et  seq. ; 
Valenti,  Principi  di  scienza  economica,  Florence,  1906,  pp.  Ill,  et  seq.,  207, 
et  seq.,  419,  et  seq.;  Seligman,  Principles  of  Economics,  p.  277  ;  Davenport, 
Value  and  Distribution,  London,  1908,  p.  122  ;  Fetter,  Principles  of  Economics, 
New  York,  1904,  pp.  43,  403  ;  Fisher,  Income,  pp.  105-6,  150,  165,  et  seq.; 
Kalinoff,  Ricardo  und  die  Grenziuerththeorie,  Tubingen,  1907,  pp.  104,  et  seq.  ; 
Liefmann,  Ertrag  und  Einkommen  auf  der  Grundlage  einer  rein  subjectiven 
Werthlehrer,  Jena,  1907  ;  Smart,  Ttie  Distribution  of  Income,  London,  1899, 
p.  322,  et  passim  ;  Carver,  The  Distribution  of  Wealth,  New  York,  1904, 
p.    123;  Roscher,  System,  I,  p.   327  (1877);    Meyer,   Das   Wesen  des  Ein- 


The  Detennination  of  Lncoine  67 

§  3.  Complications  Arising  from  the  Circulation 
OF  Income 

The  determination  of  income  effected  by  the  means  which 
have  been  explained  encounters  at  the  very  outset  certain 
difficulties  dependent  upon  the  circulation  of  income.  If  the 
income  is  directly  consumed  in  the  product  in  which  it  is 
received,  no  complication  arises.  But,  in  actual  fact,  income 
is  not  necessarily  consumed  in  the  product  in  which  it  is 
received  ;  on  the  contrary,  in  an  economy  of  exchange,  it  is 
as  a  rule  converted  into  other  products,  either  of  consumption 
or  of  reproduction  ;  there  results  from  this  a  process  of 
exchange  as  between  the  different  lands  of  income-products 
or  as  between  income-products  and  products  of  reproduction. 
The  income-products  (and  with  these  the  products  necessary 
for  their  reproduction)  are  the  very  first,  in  order  of  time,  to 
enter  into  the  process  of  circulation,  which  only  at  a  later  epoch 
extends  to  subsistence -products.  ^  For  many  centuries  trade 
is  confined  to  products  of  luxury,  which,  since  they  possess  a 
high  value  in  relation  to  their  bulk,  wiU  bear  better  than  other 
products  a  high  cost  of  transport. ^  Further,  production  for 
exchange  is  for  a  very  long  time  confined  to  objects  of  luxury, 
while  the  strict  necessaries  of  Hfe  are  produced  under  the 
immediate  superintendence  of  their  consumer.  This  amounts 
to  saying  that  for  a  very  considerable  period  exchange  relates 
only  to  income,  and  does  not  concern  subsistences. 

Now  the  circulation  of  income,  hke  that  of  any  other  portion 
of  the  social  product,  may  encounter  obstacles  and  difficulties. 

konimens,  Berlin,  1887,  p.  166,  et  seq.  ;  Wagner,  Grundlegung  der  Volkswirt- 
schaftslehre,  2nd  edition,  1892,  I,  p.  418,  and  also  Zur  Methodik  der  Statiatik 
des  Volkseinkommens  und  Volkavermogens,  "  Zeitsch.  des  preuss.  Statist. 
Bureau,"  1904,  pp.  41,  ef  seq.;  Lexis,  Worterbuch  der  Volkswirtsch.,  v.  "  Ein- 
kommen "  ;  Fellner,  Die  Schatzung  des  Volkseinkommens,  Berlin,  1904 ; 
Marx,  Mehrwerththeorien,  I,  pp.  259,  et  seq.;  Nazzani,  Sunto  di  Economia 
politica,  9th  edition,  1903,  p.  82  ;  Pierson,  Leerboek  der  Staatshuishudkunde, 
Haarlem,  1902,  II,  pp.  SI,  et  seq.;  Sax,  Grundlegung  der  theoretischen  Staats- 
wirtschaft,  Vienna,  1888,  p.  241  ;  Bela  Foldes,  Beitrdge  zurlEinkommenslehre, 
Berlin,  1906,  p.  17;  Dudley  Baxter, ^aiionaZ Income,  London,  1868,  pp.  67,  ei^eg. 

^  Roscher,  System,  III,  pp.  61,  495. 

2  Michlachewski  [Exchange  and  Political  Economy],  p.  316. — The  trade  of 
the  Venetian  Republic  was  exclusively  concerned  with  income-products  ; 
Venice  imported  from  the  East  drugs  and  spices,  and  exported  in  exchange 
Russian  furs,  Spanish  coral,  Cyprus  rugs  (Fanno,  Uespansione  commerciale  e 
coloniale  degli  stati  moderni,  Turin,  1906,  p.  229). 


68  The  Econo7mc  Synthesis 

First  of  all,  the  exchange  of  part  of  the  income-products  for 
products  of  reproduction  or  technical  capital  may  meet  with 
a  hindrance  if  the  technical  capital  is  not  in  the  market,  or  if 
it  has  not  been  produced  at  all,  or  not  in  the  quaHty  or  quantity 
required  by  the  recipients  of  income  ;  or,  conversely,  if  the 
technical  capital  has  been  produced  in  excess  of  the  quantity 
required  by  the  recipients  of  income.  Of  this  nature  is  the 
phenomenon  which  is  apt  to  display  itself  towards  the  close  of 
periods  of  increasing  speculation  (as  in  England  in  1847,  and 
of  late  years  in  the  United  States),  wherein,  as  a  rule, 
there  is  produced  a  quantity  of  technical  capital  in  excess  of 
that  which  the  new  portions  of  income  successively  saved  are 
capable  of  absorbing.  ^  Next  it  may  happen  that  the  quantity 
of  circulating  technical  capital  is  inferior  to  that  requisite  to 
put  in  operation  the  fixed  capital  which  has  been  too  rapidly 
increased.  In  all  such  cases  there  inevitably  results  a  state 
of  inequivalence,  a  lack  of  equihbrium,  and  even  a  crisis 
— ^a  subject  discussed  by  Marx  in  the  most  subtle  and  masterly 
manner.  ^  Thus,  again,  there  may  be  a  total  lack,  or  a  lack  in 
the  quantity  and  quaHty  desired,  of  the  products  of  con- 
sumption for  which  the  recipients  of  income  desire  to  exchange 
the  income-products  directly  received  by  them,  or  the 
monetary  equivalent  of  these.  Further,  it  may  happen  that 
the  recipients  of  income  who  have  hitherto  transformed  their 
own  income  into  certain  determinate  products,  now  suddenly 
change  their  views  and  prefer  some  other  commodities.  In 
this  connexion  it  must  also  be  pointed  out  that  the  fluctua- 
tions of  fashion  are  far  more  frequent  and  far  more  extensive 
in  respect  of  income-products  than  in  respect  of  subsistence- 
products,  inasmuch  as,  from  the  very  nature  of  these  latter, 
their  consumption  is  far  less  exposed  to  the  volatile  fancies  of 
the  consumer.  Last  of  all,  it  may  happen  that  the  recipients 
of  income  do  not  employ  the  entire  monetary  equivalent  of  the 
income-products  directly  received  by  them  to  the  acquisition 
of  other  income -products,  but  hoard  a  part  of  this  monetary 
equivalent.  Now  in  all  such  cases  we  have,  on  the  one  hand, 
a  theoretical  inequivalence,  in  so  far  as  the  sum  of  the  incomes 

*  Cf.  Tugan-Baranowski,  Studien  zur  Theorie  und  Oeachichie  der  Handele- 
krisen  in  England,  Jena,  1901,  pp.  249-50. 

2  Marx,  Mehrwerththeorien,  I,  pp.  190,  217,  221,  etc. 


The  Determination  of  Income  69 

expressed  in  money  is  not  equal  to  the  total  value  of  the 
products  acquired  by  the  recipients  of  income  ;  and,  on  the 
other  hand,  which  is  more  serious,  we  have  a  gross  practical 
inequivalence,  in  proportion  as  the  supply  of  income-products 
is  inferior  or  superior  to  the  demand,  leading  to  a  tumultuous 
rise  in  prices,  or  to  an  extensive  fall  in  prices  and  to  a 
disastrous  depression  of  trade. ^ 

In  any  case,  however,  this  inequivalence  is  merely  temporary, 
and  its  importance  must  not  be  exaggerated.  If  we  take  into 
consideration  a  period  of  considerable  duration  in  which  the 
conditions  are  relatively  normal,  we  ultimately  find  a  necessary 
and  permanent  equivalence  between  the  total  purchasing 
power  of  the  recipients  of  income  and  the  total  quantity  of 
income-products  existing  in  the  market.  Substantially,  the 
total  quantity  of  income-products  is  always  necessarily  equiva- 
lent to  the  sum  of  the  real  incomes  immediately  received  by 
the  individual  recipients  of  income,  or,  better  expressed,  it  is 
that  sum  2  ;  and  all  that  exchange  effects  is  the  transfer  of 
single  quantities  of  income-products  from  one  owner  to  another 
without  affecting  the  equivalence  previously  established.  Every 
individual  income,  in  so  far  as  it  is  equivalent  to  another  indi- 
vidual income,  forms  the  outlet  for  the  products  of  which  the 
latter  income  is  made  up,  or  transfers  itself  to  the  owner  of 
these  products,  who  in  his  turn  transfers  his  own  products  to  the 
owner  of  the  former  ;  whereas  those  parts  of  income  eventu- 
ally remaining  on  hand,  or  those  parts  of  the  income-products 
which  fail  to  find  counterparts  in  other  portions  of  the  income- 
products  of  other  individuals,  must  be  consumed  in  kind  by 
their  owners.  But  in  every  case  there  always  exists  a  perfect 
equivalence  between  the  total  purchasing  power  of  the  re- 
cipients of  income  and  the  totaHty  of  the  income-products. 

Utterly  fantastical,  therefore,  are  the  fears  of  Sismondi, 
Meyer,  and  a  hundred  others,  when  they  are  afraid  that  the 
total  purchasing  power  representing  the  quantity  of  private 
incomes,  may  not  be  devoted  to  the  purchase  of  all  the  pro- 
ducts existing  in  the  market,  but  may  be  hoarded,  or  saved,  or 

^  Thus,  in  England,  in  the  year  1846,  the  rise  in  the  prices  of  products  of 
prime  necessity  induced  by  reaction  a  fall  in  the  prices  of  products  of 
secondary  necessity  (Tooke,  History,  IV,  p.  69). 

'  Seager,  Introduction  to  Economics,  3rd  edition,  New  York,  1906,  pp.  156, 
et  seq. 


70  The  Economic  Synthesis 

diverted  to  the  purchase  of  foreign  products.^  If  we  suppose 
that  some  of  the  recipients  of  income  hoard  a  part  of  their 
income  in  the  form  of  money,  this  may  indeed  give  rise  to  a 
temporary  depression  of  trade,  by  directly  removing  from  the 
market  the  buyers  of  those  commodities  which  these  recipients 
of  income  would  otherwise  have  bought  ;  but,  in  the  long  run, 
the  only  sensible  result  will  be  a  scarcity  of  money  and  an 
increase  in  its  value,  which  will  enable  the  other  recipients  of 
income  to  buy  a  larger  quantity  of  products,  and  thus  to  get 
possession  of  those  products  which  the  hoarders  have  failed 
to  buy.  Hence,  in  such  a  case,  the  equivalence  between 
the  total  buying  power  of  the  recipients  of  income  and  the 
totality  of  income -products  existing  in  the  market  will  be 
nowise  disturbed.  ^  Leaving  out  of  account,  however,  the 
antiquated  phenomenon  of  hoarding,  and  supposing  that  the 
recipients  of  income  save  a  great  part  of  their  incomes,  the 
result  will  merely  be  that  part  of  these  incomes,  instead  of 
taking  the  form  of  products  of  consumption  and  undergoing 
exchange  for  other  products  of  consumption,  will  take  the 
form  of  products  of  reproduction,  and  will  undergo  exchange 
for  other  products  of  reproduction.  Taking  the  extreme  case 
in  which  the  whole  of  the  income  is  saved,  the  various  pro- 
ducers, instead  of  producing  the  income -products  in  the  form 
of  products  of  consumption,  a,  b,  c,  will  produce  these  in  the 
form  of  products  of  reproduction,  a',  b',  c',  proceeding  then  to 
a  mutual  exchange,  in  so  far  as  each  of  them  desires  a  product 
of  reproduction  different  from  that  in  which  he  has  directly 
produced  and  received  his  own  income.  That  is  all !  This  is 
the  whole  account  of  a  phenomenon  which  has  undeservedly 
given  rise  to  so  many  erudite  controversies  and  to  so  many 
anxious  doubts, ^ 

*  Sismondi,  Nouveaux  principes,  I,  pp.  105,  et  seq.,  117,  et  seq.;  Meyer, 
loc.  cit.,  pp.  249,  et  seq. 

2  Bailey  {Money  and  its  Vicissitudes,  London,  1837,  pp.  65,  etseq.)  believed 
that  the  discovery  of  a  treasure  and  its  entry  into  circulation  immediately 
created  a  new  demand  for  products,  and  thus  gave  employment  to  capital 
and  labour  otherwise  stagnant.  But  this  is  a  mistake.  Just  as  the  hoarding 
of  m.oney  simply  leads  to  a  scarcity  of  money,  raises  its  value,  and  increases  the 
purchasing  power  of  its  other  owners  ;  so,  on  the  other  hand,  to  throw  the 
contents  of  a  hoard  into  circulation,  merely  diminishes  the  value  of  money 
and  lessens  the  purchasing  power  its  owners  previously  possessed. 

'  Thus  fall  to  the  ground  the  encomiimis  of  prodigality  so  dear  to  the 
ancients  and  not  unknown  to-day.    It  is  asserted  that  the  prodigal  is  a  social 


The  Determination  of  Income  71 

For  the  same  reasons,  yet  more  fantastical  appears  the  thesis 
of  Bernhardi,  Rodbertus,  Hertzka,  Baker,  Gunton,  Issajeff, 
Hobson,  Supino,  and  others,  who  attribute  commercial  crises 
to  the  fact  that  the  greater  part  of  the  product  accumulates 
in  the  hands  of  the  recipients  of  income,  who  are  unwilHng 
and  unable  to  devote  the  whole  of  it  to  the  purchase  of  com- 
modities, and  in  great  part  save  it,  or,  worse  still,  keep  it  idle 
while  awaiting  fruitful  employment  for  it,  thus  depriving  of 
outlet  the  products  offered  in  the  market.^  This  view  is 
erroneous,  because  these  incomes,  while  awaiting  employ- 
ment, are  simpl}^  deposited  in  a  bank  or  other  institution 
of  credit,  and  are  lent  by  these  for  use  in  production  or 
trade,  and  thus  increase  the  demand  for  products.  If,  on  the 
other  hand,  the  incomes  are  employed  in  speculation,  if  they 
do  not  immediately  acquire  products,  they  acquire  securities, 
that  is  to  say  they  transmit  to  the  sellers  of  these  securities  a 
purchasing  power  which  is  employed  in  the  purchase  of  pro- 
ducts. In  any  case,  the  income  must  necessaril}^  in  the  long 
run  be  completely  transformed  into  products,  so  that  it  is 
categorically  impossible  that  there  should  arise  any  permanent 
divergence  between  the  purchasing  power  represented  by 
income  and  the  totality  of  the  products  existing  in  the  market. 

We  need  not  take  any  more  seriously  the  disturbance  of 
mind  of  certain  sociologists  who  fear  that  the  realisation  of 
income  is  surrounded  by  greater  difficulties  and  embarrass- 
ments than  the  realisation  of  subsistence.  In  Russia, 
for  example,  Woronzoff  has  advocated  the  view  that  sub- 
sistence is  expended  upon  national  products  and  income  upon 
foreign  products,  and  infers  from  this  that  the  reaHsation  of 
income  renders  necessary  a  more  far-seeing  organisation  of 
international  commerce,  and  that  it  is  exposed  to  the  gravest 

benefactor  because  he  provides  an  income  for  the  producers  of  the  com- 
modities which  he  buys.  Nothing  could  be  falser  than  this  view.  The  pro- 
ducer draws  an  income  from  his  own  product,  and  not  from  its  purchaser  ; 
and  the  fact  that  this  purchaser  is  prodigal  on  the  one  hand,  or  thrifty  on  the 
other,  merely  affects  the  quality  of  the  product,  which  in  one  case  will  be  a 
product  of  consumption,  and  in  the  other  case  a  product  of  reproduction. 

^  In  addition  to  the  well-known  works  of  Rodbertus,  consult  Baker,  Mono- 
polies  and  the  People,  New  York,  1890,  p.  171  ;  Hobson,  Imperialism,  London, 
1902,  pp.  89,  et  seq.,  who  considers  imperialism  as  the  result  of  the  need  for 
finding  an  outlet  for  that  part  of  the  national  production  which  exceeds  the 
powers  of  consumption  of  the  income-taking  class  ;  Supino,  Le  crisi  econo' 
miche,  Milan,  1907,  pp.  59-65. 


72  The  Economic  Synthesis 

dangers  when  international  commerce  declines  or  meets  with 
obstacles.^  This  thesis,  as  anyone  can  see,  is  a  purely  arbitrary 
one,  which  may.  have  a  certain  degree  of  appHcabihty  to 
Russia,^  but  is  in  opposition  to  the  experience  of  other  nations 
and  more  particularly  to  that  of  England,  where,  on  the 
contrary,  subsistence  is  reaHsed  above  all  in  foreign  products, 
whilst  income  is  reahsed  to  a  large  extent  in  the  manufactures 
and  products  of  national  luxury.  Moreover,  where  income  is 
consumed  in  foreign  products,  there  do  not  result  any  of  those 
terrible  consequences  anticipated  by  these  ultra-theoretical 
economists  ;  for  the  only  result  is  an  increased  demand  for 
foreign  products  on  the  part  of  the  country  to  which  the 
recipients  of  income  belong,  and  this  exercises  an  unfavour- 
able influence  upon  the  international  value  of  the  commodities 
which  that  country  exports. 

The  circulation  of  income,  or  the  interchange  of  the  products 
in  the  hands  of  the  recipients  of  income,  is  facilitated,  like  any 
other  process  of  exchange,  by  the  intermediation  of  money. 
The  very  existence  of  money  presupposes  the  existence  of 
income  ;  for  if  the  product  is  barely  adequate  to  supply  the 
subsistence  of  the  labourer,  he  can  never  sterilise  any  portion 
thereof  in  a  product  incapable  of  consumption,  such  as  money. 
Wherever,  therefore,  money  makes  its  appearance,  it  is  neces- 
sary that  the  product  should  exceed  the  subsistence  of  the 
labourer,  that  is  to  say,  that  it  should  include  an  income.  Yet 
more,  it  is  necessary  that  the  income  should  attain  a  certain 
elevation  ;  for,  where  income  is  scanty,  all  that  portion  of  it 
which  can  be  withdrawn  from  the  consumption  of  the  recipi- 
ents of  income  will  be  transformed  into  productive  capital  and 
not  into  unproductive  wealth,  such  as  money.     The  existence 

1  Woronzoff,  {The  Future  of  Capitalism  in  Russia],  Petersburg,  1883.  In 
essence  these  views,  like  so  many  other  lucubrations  of  the  Russian  economists, 
are  merely  a  tardy  reproduction  of  the  old  theses  of  Western  science.  In  fact, 
Adam  Smith  {loc.  cit.,  p.  347)  affirmed  long  ago  that  the  advantage  of  foreign 
commerce  was  that  it  effected  the  exportation  of  that  quantity  of  products 
for  which  there  was  no  demand  at  home.  Therefore,  still  according  to  Adam 
Smith,  since  a  portion  of  the  national  income  is  unemployed  in  the  pur- 
chase of  national  products,  a  part  of  these  must  go  abroad.  Thus,  both 
Woronzoff  and  Adam  Smith  affirm  that  a  part  of  income  is  not  consumed  in 
national  products,  and  deduce  from  this  the  need  for  foreign  commerce — 
Woronzoff  to  render  possible  the  realisation  of  the  income,  and  Smith  to 
render  possible  the  realisation  of  the  national  products  in  which  the  national 
income  is  not  consumed. 

2  Ilejin,  [The  Evolution  of  Capitalism  in  Russia^  Petersburg,  1899,  p.  6. 


The  Determination  of  Income  73 

of  income,  and  its  existence  at  a  comparatively  high  level,  are 
therefore  essential  preconditions  to  the  genesis  of  money.  ^ 

Now,  given  the  institution  of  money,  to  effect  the  circulation 
of  income  a  more  or  less  considerable  quantity  of  money  is 
essential.  In  this  connexion,  a  banker,  imbued  with  all  the 
pecuhar  economic  prejudices  of  his  caste,  affirms  that  it  is 
the  circulation  of  income  alone  which  necessitates  the  issue 
of  bank-notes  or  of  money,  whereas  the  circulation  of  capital 
is  accomplished  without  giving  rise  to  any  further  issue  of 
money.  2  But  this  assertion  is  unfounded.  In  fact,  the  sale  of 
landed  property,  or  of  any  other  portion  of  capital,  though  the 
transaction  may  be  carried  out  by  means  of  cheques  and 
book-credits,  is  often  effected  for  money  of  which  to  that 
extent  the  transaction  demands  the  issue.  And,  if  the  money 
thus  obtained  can  be  deposited,  or  otherwise  employed,  the 
same  is  or  may  be  true  of  the  money  obtained  in  exchange 
for  income  or  for  any  product.  Further,  the  issue  of  bank- 
notes is  regularly  effected  against  bills  of  exchange  ;  now, 
the  bill  of  exchange  represents  a  commodity  in  process  of 
formation,  that  is  to  say,  in  part  at  least,  reahsable  capital. 
If  John  Smith,  who  has  bought  my  product,  pays  for  it  with 
a  bill  of  exchange,  this  is  because  the  capital  which  he  has 
employed  in  his  productive  work  is  not  yet  realised  in 
the  product  ;  the  bill  of  exchange,  therefore,  precisely  repre- 
sents John  Smith's  capital  which  is  in  course  of  reaUsation, 
and  the  bank-notes  issued  on  account  of  this  bill  of  exchange 
precisely  correspond  to  this  capital.  Hence  it  is  not  always 
true  that  the  circulation  of  capital  is  effected  without  giving  rise 
to  a  fresh  issue  of  money.  Nor  is  it  true,  conversely,  that  the 
circulation  of  income  always  necessitates  a  fresh  issue  of 
money  ;  for  it  may  weU  happen  that  the  circulation  of  income 
may  be  effected  by  means  of  book-credits  without  giving  rise 
to  any  additional  issue  of  money.  Thus  the  proposed  distinc- 
tion in  this  respect  between  capital  and  income  has  not  a  shadow 
of  foundation  ;  and  the  truth  still  subsists  in  the  old  thesis 
of  Adam  Smith  and  of  Tooke,  that  the  circulation  of  capital  is 
effected  to  a  greater  extent  by  means  of  cheques  and  bills  of 

^  Cf.  Conant,  Principles  of  Money  and  Banking,  New  York,  1905,  I, 
pp.  36,  248,  et  seq. 

2  Circulating  Capital^  by  an  East  India  Merchant,  London,  1885,  p.  106. 


74  The  Economic  Synthesis 

exchange  than  is  the  circulation  of  income  ;  and  that  the 
money  needed  for  the  circulation  of  capital  consists  of  bank- 
notes of  a  high  figure  and  a  slow  rate  of  circulation,  whereas 
the  money  needed  for  the  circulation  of  income  consists  almost 
exclusively  of  bank-notes  of  a  low  figure  and  a  rapid  rate  of 
circulation.^ 

*  Smith,  loc.  cit.,  p.  258. — Tooke,  Inquiry  into  the  Currency  Principle,  p.  34. 


CHAPTER   III 
THE  FORMS  OF  INCOME 

§  1.  Fundamental  Forms  of  Income 

We  saw  in  the  first  chapter  that  the  coercive  association  of 
labour,  the  creator  of  income,  itself  demands  the  employ- 
ment of  a  certain  quantity  of  means  of  production  (subsistences, 
technical  capital,  land).  Now  the  means  of  production  which 
are  employed  for  the  purpose  of  effecting  the  association  of 
labour  may  be  owned  and  supphed  by  the  labourers  them- 
selves, or,  on  the  other  hand,  by  non-labourers.  This  difference 
exercises  a  notable  influence  upon  social  production  and 
distribution. 

If  the  means  of  production  are  owned  and  supphed  by  the 
labourers  themselves,  the  individuals  who  participate  in  the 
work  of  production  will  be  found  in  conditions  of  substantial 
economic  equaHty,  and  this  excludes  the  possibihty  of  the 
supremacy  or  dominion  of  one  over  the  others.  Hence,  in  such 
conditions,  the  power  effecting  the  coercive  association  of 
labour  cannot  be  exercised  by  a  more  or  less  numerous  fraction 
of  the  associates,  but  must  emanate  from  the  entire  collectivity. 
In  other  words,  in  such  conditions,  the  force  constraining  to 
the  association  of  labour  must  necessarily  be  collective,  or  must 
originate  in  the  entire  aggregate  of  the  labourers,  in  the  labour- 
collectivity. 

If,  on  the  other  hand,  the  means  of  production  are  owned 
and  supphed  by  persons  who  are  not  labourers,  there  is  created 
a  primary  inequality  of  conditions  between  the  owners  of  the 
means  of  production  and  the  labourers  who  do  not  possess 
these  means,  and  an  economic  advantage  of  the  former  over 
the  latter.  Now  this  economic  advantage  renders  it  possible 
to  the  owners  of  the  means  of  production  to  impose  upon  the 
labourers  the  association  of  labour,  and  for  this  reason  the 
coercive  force  effecting  the  association  of  labour,  which  in  the 

75 


76  The  Economic  Synthesis 

former  case  emanated  from  the  collectivity  of  the  workers, 
emanates  in  this  case  from  the  work  of  the  private  owners. 
Coercion  by  the  labour-collectivity  gives  place  to  coercion  by 
the  individual  non-labourer. 

This  (ii£ference  between  the  methods  of  coercion  by  which 
the  association  of  labour  is  effected,  changes  the  character 
of  the  association  of  the  other  elements  of  production.  When 
the  means  of  production  are  owned  and  suppHed  by  labour, 
the  coercion  effecting  the  association  of  labour  effects  also 
per  se  a  coercive  association  of  the  means  of  production  ;  for 
in  such  conditions  labour,  being  intimately  inter-connected 
with  the  means  of  production,  draws  these  means  also  within 
the  influence  of  the  coercion  by  which  it  is  itself  discipHned. 
When,  on  the  other  hand,  the  means  of  production  are  owned 
and  supphed  by  non- workers,  the  coercion  which  effects  the 
association  of  labour  does  not  necessarily  involve  a  correlative 
coercive  association  of  the  means  of  production  ;  and  there- 
fore, in  such  conditions,  whilst  the  association  of  labour  is 
necessarily  coercive,  that  of  the  means  of  production  is,  or 
may  be,  free. 

From  the  fundamental  difference  here  pointed  out,  there 
arise,  however,  far  more  striking  differences  in  the  very  struc- 
ture of  income.  It  is  obvious  that  in  all  cases  the  OAvners  of  the 
means  of  production  contributing  to  the  creation  of  income 
can  claim  a  part  of  tliis  income.  But  if  the  means  of  pro- 
duction are  owned  and  supplied  exclusively  by  the  labourers 
themselves,  the  part  of  the  income  assigned  to  the  means  of 
production  is  in  actual  fact  received  by  labour,  that  is  to  say, 
by  the  same  persons  who  receive  subsistences.  In  other  words, 
in  such  conditions  income  and  subsistence  are  actually  in- 
separable. 

If,  on  the  other  hand,  all  the  labourers,  or  a  part  of  these,  are 
persons  who  neither  own  nor  supply  the  instruments  of  pro- 
duction, the  income  or  that  part  of  it  assigned  to  the  means  of 
production,  is  not  received  by  the  labourers,  or  is  not  received 
by  a  part  of  these  ;  that  is  to  say,  income  is  not  received  by 
those  who  receive  subsistences.  Therefore,  in  such  conditions, 
the  whole  or  a  part  of  those  who  receive  subsistence  do  not 
receive  income,  and  conversely  ;  that  is  to  say,  income  is 
completely  or  partially  divorced  from  subsistence. 


The  Forms  of  Income  77 

Several  cases  are  possible.  It  may  happen  that  the 
income  is  exclusively  assigned  to  the  means  of  production, 
and  that  these  are  exclusively  owned  and  supplied  by  non- 
labourers.  In  this  case,  the  income  is  wholly  received  by  the 
non-labourers,  while  the  labourers  are  wholly  excluded  from 
it.  In  other  words,  income  is  totally  divorced  from  subsistence, 
and  the  idle  existence  which  the  creation  of  income  alone 
renders  possible  now  becomes  for  the  first  time  an  actual  fact. 
— It  must  be  added,  however,  that  to  render  possible  the 
actual  divorce  of  income  from  subsistence,  it  is  necessary  that 
the  collective  labour  of  the  producers  should  produce,  over 
and  above  their  own  subsistence,  at  least  what  is  necessary 
for  the  support  of  one  additional  man  ;  for  if  their  labour 
produces  less  than  this,  no  one  can  live  without  working,  and 
for  this  reason  the  income  as  a  whole  will  necessarily  be  affili- 
ated to  subsistence. 

It  may  happen,  again,  that  the  income  is  exclusively 
assigned  to  the  means  of  production,  but  that  these  are  owned 
and  suppHed  by  a  part  only  of  the  labourers.  In  this  case, 
income  is  received  by  a  part  only  of  the  labourers,  to  the 
exclusion  of  the  remainder.  Hence  a  part  of  the  subsistence 
is  connected  with  income,  while  the  other  part  is  disjoined. 

It  may  happen  that  the  income  is  exclusively  assigned  to 
the  means  of  production,  but  that  these  are  in  part  supplied 
by  labourers  and  in  part  by  non-labourers.  In  this  case, 
income  is  partly  received  by  labourers,  partly  by  non-labourers ; 
that  is  to  say,  part  of  income  is  connected  with  subsistence, 
while  the  other  part  is  disjoined. 

Finally  it  may  happen  that  the  income  is  partly  assigned  to 
the  means  of  production  and  partly  to  labour,  but  that  the 
means  of  production  are  exclusively  supphed  by  non-labourers. 
In  this  case,  part  of  the  income  is  received  by  the  labourers 
and  the  remainder  by  non-labourers  ;  that  is  to  say  a  part  of 
the  income  is  connected  with  subsistence,  while  the  other  part 
is  disjoined. 

Now,  when  the  means  of  production  are  exclusively  owned 
and  suppHed  by  labourers,  so  that  these  receive  the  entire  in- 
come, and  there  is  complete  actual  consoHdation  of  income  with 
subsistence,  we  say  that  the  income  is  undifferentiated.  When 
the  means  of  production  are  wholly  owned  and  supphed  by 


73  The  Economic  Synthesis 

non-labourers,  so  that  these  receive  the  entire  income,  and  there 
is  complete  actual  separation  of  income  from  subsistence,  we 
say  that  the  income  is  differentiated.  When  the  means  of 
production  are  exclusively  owned  by  a  part  of  the  labourers, 
so  that  this  part  of  these  receives  the  entire  income,  and  a  part 
of  subsistence  is  disjoined  from  income  ;  or  when  the  means 
of  production  are  partially  owned  by  the  whole  of  the  labourers, 
so  that  the  income  is  partially  received  by  the  labourers,  and 
a  part  only  of  the  income  is  disjoined  from  subsistence  ;  or 
when,  although  the  means  of  production  are  wholly  owned  by 
non-labourers,  a  part  of  the  income  goes  to  the  labourers,  and 
therefore  a  part  only  of  the  income  is  connected  with  sub- 
sistence— in  all  these  cases,  in  which  there  is  a  partial  actual 
separation  of  income  from  subsistence,  we  say  that  the  income 
is  mixed.  It  will  be  readily  understood  that  these  three  forms 
present  varying  difficulties  in  the  way  of  the  determination  of 
income.  This  determination  is  comparatively  easy  in  the 
case  of  differentiated  income,  that  which  is  materially  and 
actually  detached  from  subsistence  ;  it  is  more  difficult  in  the 
case  of  undifferentiated  income  ;  and  it  presents  the  maximum 
difficulty  in  the  case  of  mixed  income. 

There  are  thus  three  forms  of  income.  In  the  first  of  these, 
undifferentiated  income,  labour  is  completely  conjoined  with 
the  ownership  of  the  means  of  production  and  with  income. 
In  the  second,  differentiated  income,  labour  is  completely 
disjoined  from  the  ownership  of  the  means  of  production  and 
from  income.  In  the  third,  mixed  income,  labour  may  be 
partially  or  wholly  disjoined  from  the  ownership  of  the  means 
of  production,  but  it  is  always  partially  conjoined  with  income. 
If  we  leave  out  of  consideration  that  case  of  mixed  income  in 
which  the  labourer  is  completely  deprived  of  the  ownership 
of  the  means  of  production,  we  may  say  that  the  three  forms 
of  income  are  the  product  of  as  many  different  degrees  of  the 
association  between  labour  and  the  ownership  of  the  means 
of  production,  varying  according  as  this  association  is  com- 
plete, non-existent,  or  partial.  Now,  each  of  these  forms  of 
income  constitutes  the  nucleus  of  a  different  form  of 
economy. 

We  saw  in  the  first  chapter  that  there  are  three  fundamental 
forms   of  industry,  corresponding   to    as    many    degrees    of 


The  Forms  of  Income  79 

the  association  of  labour  with  labour ;  we  shall  see  now 
that  there  are  three  forms  of  economy,  corresponding  to 
as  many  degrees  of  the  association  of  labour  with  the 
ownership  of  the  means  of  production.  Let  us  add  that 
each  of  these  three  forms  of  economy  can  perfectly  com- 
bine with  the  three  forms  of  industry,  that  is  to  say, 
that  undifferentiated,  differentiated,  or  mixed  income  may 
occur  in  association  with  the  craft,  with  manufacture,  or  with 
machino-facture.  Although,  as  we  saw  in  the  first  chapter, 
isolated  labour  is  normally  incompetent  to  produce  income,  we 
cannot,  all  the  same,  exclude  the  occasional  possibiUty  of  this 
occurrence.  In  this  case,  according  as  labour  exhibits  complete, 
non-existent,  or  partial  ownership  of  the  means  of  production, 
the  income  thus  arising  out  of  isolated  labour  will  be  un- 
differentiated, differentiated,  or  mixed.  However  this  may  be, 
in  the  subsequent  discussion  we  shall  leave  out  of  account 
income  produced  by  isolated  labour,  in  view  of  the  exceptional 
character  of  this  income.  To  sum  up,  the  three  forms  of 
income  can  be  combined  with  the  most  various  gradations  of 
the  complex  association  of  labour,  and  also  of  exchange,  which 
latter  may  be  non-existent,  local,  regional,  national,  inter- 
national, etc.  For  example,  if  one  or  more  labourers  produce 
for  a  non-labourer,  there  is  always  differentiated  income  ; 
if  they  produce  on  their  own  account,  there  is  always  un- 
differentiated income  ;  and  this  whether  the  non-labourer  in 
the  former  case  or  the  labourers  in  the  latter  case  consume 
their  products  in  kind,  or  sell  them  in  the  market.^ 

§  2.  Undifferentiated  Income 

Considering  in  the  first  place  undifferentiated  income,  we 
find  that  in  this  form  of  income  the  labourer,  employing 
technical  capital,  first  produces  and  appropriates  subsistence, 
which  is  precisely  equal  to  the  product  of  the  labour  and  the 
unitary  capital ;  and  then,  by  means  of  the  association  of 
labour,  he  produces  and  appropriates  income.    In  such  con- 

^  Hence  the  distinction,  upon  which  Marx  insists  so  strongly  {Mehrwerth- 
theorien,  I,  pp.  399,  et  seq.,  p.  417),  and  also  Biicher,  between  production  for 
the  consumer  by  means  advanced  by  this  latter,  and  production  for  the 
capitalist,  is  an  unsubstantial  one  ;  for  in  either  case  we  have  differentiated 
income,  which  in  the  former  instance  is  consumed  in  kind,  and  in  the  latter 
case  is  exchanged  for  other  objects  of  consumption. 


8o  The  Economic  Synthesis 

ditions,  therefore,  the  labourer,  having  obtained  at  a  cer- 
tain cost,  the  product  of  his  isolated  labour  and  isolated 
technical  capital,  proceeds  to  appropriate  the  product  of  the 
association  of  labour  without  incurring  any  further  cost 
beyond  the  acceptance  of  the  shackles  imposed  upon  his  in- 
dependence by  the  very  nature  of  the  association ;  that  is  to 
say,  the  labourer  obtains  part  of  the  product  onerously  and 
another  part  gratuitously. 

Let  us  proceed.  The  essential  character  of  undifferentiated 
income  is  that  labour,  the  recipient  of  subsistence,  is  also  the 
sole  recipient  of  income.  Now  this  fact  impHes  that  the 
labourer  should  be  the  owner,  effective  or  virtual,  of  the  means 
of  production,  since  only  in  consequence  of  such  ownership 
does  he  appropriate  or  can  he  appropriate  the  entire  product, 
without  having  to  divide  it  with  anyone  else.  But  the  labourer 
cannot  himself  own  the  means  of  production  unless  it  be 
possible  for  him,  if  he  will,  to  produce  these  on  his  own  account ; 
and  this  in  its  turn  is  possible  only  if  he  has  free  access  to  the 
land.  It  may  therefore  be  said  that  undifferentiated  income 
presupposes  that  the  land  should  be  accessible  to  the  labourer, 
or  that  he  should  be  empowered  to  occupy  a  tract  of  land 
sufficient  to  produce  the  instruments  of  production.  This, 
in  its  turn,  presupposes  two  conditions  :  the  effective  existence 
of  free  land,  accessible  to  the  labourer  ;  and  that  the  labourer 
should  possess  legal  freedom,  and  not  be  subjected  to  the 
power  of  another.  Whence  follows  the  consequence  that,  in 
such  circumstances,  the  association  of  labour,  when  it  brings 
together  several  producers  upon  the  land  belonging  to  a  single 
individual,  imphes  the  existence  of  a  further  condition,  in 
addition  to  those  previously  pointed  out,  namely,  the  de- 
privation of  free  land. 

Where  undifferentiated  income  is  based  upon  the  free 
association  of  labour,  it  presents  a  second  essential  character- 
istic which  is  a  corollary  of  the  first ;  this  is,  that  all  the  pro- 
ducers shall  be  perfectly  functional  and  mutually  convertible, 
so  that  each  one  of  them  can  always  be  transferred  to  the 
production  or  to  the  economic  condition  of  any  one  of  the 
others.  I  In  fact,  in  such  conditions,  every  fresh  addition  to  the 
population  can  always  transfer  himseK  to  the  free  land  and 
there  produce  the  technical  capital  which  will  fertiUse  his 


The  Forms  of  Income  8i 

labour  ;  that  is  to  say,  he  can  always  place  himself  in  a  posi- 
tion identical  with  that  of  the  producers  already  estabhshed. 
Further,  since  the  competition  among  the  producers  is  un- 
restricted, each  one  of  them  has  full  power  to  devote  himself 
to  whatever  production  he  prefers.  This  excludes  the  possi- 
bility that  one  producer  can  acquire  a  monopoly  of  any  kind, 
or  can  permanently  place  himself  in  a  privileged  position. 
Finally,  since  each  producer  can  employ  his  own  capital  only 
with  his  own  labour,  that  economic  advantage  which  may 
be  the  outcome  of  a  superiority  of  intelligence  or  of  environ- 
ment is  necessarily  also  kept  within  strictly  circumscribed 
limits.  For  these  reasons,  in  such  conditions,  the  divergencies 
between  the  individual  incomes  are  necessarily  transient,  in 
other  words,  the  economy  is,  from  the  very  force  of  circum- 
stances, undifferentiated ;  and,  in  correlation  with  this,  con- 
sumption also  assumes  characteristics  of  equahty,  because 
in  the  case  of  each  individual  his  total  receipts  are  distributed 
in  practically  equal  proportions  between  the  consumption  of 
necessaries  and  that  of  luxuries. 

But  we  have  seen  that  in  the  conditions  of  the  productivity 
of  the  land  that  have  hitherto  prevailed,  the  producers  are 
averse  to  the  association  of  labour,  and  that  it  is  therefore 
necessary  that  this  association  should  be  imposed  by  some 
form  of  coercion — ^which,  where  the  labourer  is  owner  of  the 
means  of  production,  involves  the  coercive  employment  of 
technical  capital,  and  emanates  from  the  collectivity  itself  of 
the  associated  labourers.  Now  this  coercive  collectivity 
assumes,  in  the  course  of  social  evolution,  three  forms  essen- 
tially diverse,  which  give  rise  to  as  many  correlatively  dis- 
similar forms  of  undifferentiated  income — ^the  communistic, 
the  corporative,  and  the  co-operative  economy. 

Even  in  the  dawn  of  human  society,  an  archaic  form  of 
productive  association  makes  its  appearance,  the  matriarchal 
family.  The  patriarchal  family,  which  succeeds  this,  is  simply 
an  institution  associating  labour  by  force,  and  in  its  beginnings 
the  patria  potestas  in  nothing  more  than  a  primitive  instrument 
for  the  coercion  of  the  associated  productive  energies.  At  a 
later  date,  the  association  of  the  producers  is  imposed  by  the 
clan  ;  and  it  is  only  at  a  still  later  epoch  that  association  is 
imposed  by  the  community,  as  in  the  Germanic  mark,  or  by 


82  The  Economic  Synthesis 

the  state,  as  in  the  great  Asiatic  and  African  empires.  At  a 
subsequent  period,  labour  is  forcibly  agglutinated  in  the  craft- 
guild,  and  is  under  the  rule  of  the  directive  authority  of  this 
body.  In  its  first  beginnings,  the  craft-guild  was  not  clearly 
distinguished  from  the  earlier  coercive  instrument,  for  the 
coercion  was  not  exercised  by  the  chiefs  of  the  guild  but  by 
the  state  itself.  Thus,  the  artisan  guilds  of  Rome  in  the  third 
century  a.d.  were  organised  and  disciphned  by  the  collective 
power  of  the  state  ^ ;  and  the  same  thing  happens  in  Peru 
under  the  rule  of  the  Incas,  where  the  natives  are  organised 
by  the  state  in  artisan  guilds. ^  In  a  later  phase,  however, 
the  guild  imposes  the  association  of  labour  by  its  own 
authority,  having  recourse  to  the  collective  power  of  the  state 
merely  as  the  executive  instrument  of  the  guild's  own  sanc- 
tions ;  and  the  medieval  commune  was  substantially  nothing 
more  than  an  entity  for  the  combination  of  productive  forces, 
completing  and  fertihsing  the  organising  work  of  the  craft- 
guild. 

Finally,  the  coercive  element  is  likewise  found  in  connexion 
with  that  form  of  undifferentiated  income  which  persists 
to-day,  that  is,  in  co-operation.  Certainly,  in  this  form 
of  income — and  herein  consists  one  ground  for  its  superi- 
ority over  the  others — there  is  absent  the  initial  coercion,  or 
coercion  of  the  first  degree,  for  in  co-operation  the  producers 
spontaneously  undertake  the  association  of  their  labour.  But 
we  have  in  co-operation  to  a  notable  extent  coercion  of  the 
second  degree,  which  is  permanent  in  character,  inasmuch  as 
it  is  necessary  that  there  should  be  a  directive  authority  to  re- 
press the  individual  and  spontaneous  initiative  and  the  mutual 
distrust  of  the  co-operators,  to  say  nothing  of  the  need  to 
disciphne  and  co-ordinate  their  forces  for  a  common  purpose. 

Now  the  collective  authority,  thus  constituted,  will  not  as 
a  rule  be  able  to  effect  the  coercive  association  of  the  producers, 
except  by  suppressing  that  primary  freedom  of  access  of  the 
labourers  to  the  land  upon  which  undifferentiated  income  is 

^  Waltzing,  Etvde  historique  sur  les  corporations  professionnelles  chez  les 
Romains,  Louvain,  1895,  II,  pp.  10,  51,  et  seq.;  Groag,  Collegien  und  Zwangs- 
genossenschaften  im  III  Jahrhundert  ;  "  Vierteljahrschrift  fiir  Sozial-  und 
Wirtschaftsgesch.,"  1904,  pp.  481,  et  seq. 

2  Payne,  History  of  the  New  World,  Oxford,  1892,  I,  p.  354  ;  II,  pp.  501, 
et  seq.    (A^notable  work.) 


The  Forms  of  Inco7ne  83 

founded.  Thus,  primitive  communities,  like  craft-guilds, 
forbade  their  members  to  abandon  the  community  to  which 
they  belonged  in  order  to  establish  themselves  on  their  own 
account  upon  an  available  piece  of  land  ;  that  is  to  say,  they 
effectively  cancelled  the  primary  accessibihty  of  the  soil,  and 
shackled  the  producers  to  the  collectivity. 

Again,  it  often  happens  that  the  central  power  thus  con- 
stituted, imposes  by  its  own  authority  the  complex  association 
of  labour  ;  that  is  to  say,  it  inexorably  confines  the  producers 
to  a  single  field  of  production,  thus  suppressing  that  mutual 
interchangeabihty  of  the  producers  which  is  a  primary  and 
essential  characteristic  of  undifferentiated  income.  We  see 
this  first  of  all  in  the  communistic  economy.  Thus,  the 
members  of  the  Germanic  mark  are  restricted  by  the  com* 
munity  to  one  immutable  field  of  production,  or  are  confined 
to  the  perpetual  repetition  of  one  single  kind  of  labour.  The 
corporative  economy  acts  in  the  same  way  ;  and  the  medieval 
corporation  (guild)  defines  by  very  strict  rules  the  sphere  of 
activity  allotted  to  each  master-craftsman.  Thus,  in  France 
and  in  Germany,  the  manufacturer  is  forbidden  to  dye  his 
own  stuffs  ;  the  dyer  of  thread  is  forbidden  to  dye  silk  or  wool 
in  the  piece,  and  vice  versa ;  and  the  hat-maker  is  forbidden 
to  retail  his  own  products.^  In  the  year  1297,  Ghent,  as  also 
Ypres,  forbids  the  manufacture  of  cloth  within  a  radius  of 
three  miles  from  the  walls  of  the  town,  and  every  year  an 
armed  force  is  sent  out  to  destroy  the  crafts  of  the  adjoining 
country.  2  A  no  less  rigorous  restriction  of  the  individual 
producer's  sphere  of  action  is  displayed  in  the  co-operative 
economy.  Further,  the  producers  thus  rigidly  confined  to  a 
single  field  of  production,  are  also  subjected  to  every  possible 
kind  of  restriction  as  regards  the  sale  of  their  products.  Already 
in  primitive  tribal  communism  the  very  faculty  of  individual 
exchange  is  suppressed,  and  the  individual  products  are  ap- 
propriated and  distributed  by  the  collective  authority  ;  and 
in  the  collectivist  economy  of  a  later  time,  exchange,  permitted 
to  individuals,  is  governed  by  rigorous  restrictions.  Similarly, 
the  craft-guilds  (for  example,  that  of  the   English  clothiers 

^  Forbonnais,  Recherches  et  considerations  sur  les  finances  de  la  France, 
Basle,  1758,  I,  p.  479. 

^  Vanderkindere,  Le  siecle  des  Artevelde,  Brussels,  1878,  p.  266. 


84  The  Econamic  Synthesis 

in  the  time  of  Richard  II)  desire  to  have  reserved  to  themselves 
the  sole  right  to  buy  and  sell  the  product  to  whose  manufacture 
they  are  restricted.^  Further,  they  wish  that  the  importation 
of  the  products  of  foreign  guilds  shall  be  forbidden  ;  that 
purchase  and  sale  shall  be  effected  in  special  markets  ;  that 
if  the  raw  material  has  been  bought  abroad,  the  product 
manufactured  from  that  raw  material  shall  also  be  sold  abroad  ; 
and  they  further  demand  a  rigorous  taxation  of  the  pro- 
ducts. Finally,  within  the  limits  of  the  co-operative  body 
itself,  there  is  no  lack  of  rules  and  restrictions  to  harass  the 
sale  of  the  merchandise.  This  rigid  restriction  of  the  producers 
within  impassable  limits  of  manufacture  and  sale  suppresses 
competition  among  the  producers,  and  therewith  deprives  the 
value  of  their  products  of  all  correlation  with  the  cost  of 
production. 

Whether  or  not  the  central  authority  imposes  in  varying 
degrees  the  complex  association  of  labour,  in  every  case  it 
imposes  the  simple  association  of  labour,  the  co-ordination  of 
the  forces  of  those  producing  the  same  commodity.  By  the 
matriarchal  family,  the  labour  of  men  belonging  to  the  various 
family  groups  is  [already  forcibly  concentrated  upon  a  circum- 
scribed area  of  land  and  around  a  single  feminine  nucleus  ; 
and  the  same  thing  is  subsequently  effected  by  the  patria 
potestas,  by  the  clan,  and  by  the  state.  Thus,  in  America, 
where  Columbus  first  had  to  impose  the  forced  association  of 
labour  upon  the  recalcitrant  Indians, ^  the  Spanish  colonising 
Mexico,  and  the  English  in  their  settlements  further  north 
were  forcibly  associated  by  the  central  authority.^  In  India, 
the  great  works  of  colonisation  are  possible  only  thanks  to  the 
forced  association  of  labourers  organised  by  the  village  com- 
munity * ;     whilst    the    Grcrmanic    mark   disciphnes    in    like 

1  Herbert,  History  of  the  Twelve  Great  Livery  Companies  of  London,  London, 
1837,  I,  p.  425. 

2  Prescott,  History  of  Ferdinand  and  Isabella,  Paris,  1842,  p.  460. 

'  Sieber  [A  Study  of  the  Primitive  Economic  Civilisation],  Petersburg,  1883, 
pp.  46,  et  seq. 

*  In  his  work  on  Th^  Indian  Village  Community  (London,  1896,  p.  325), 
Baden-Powell  says  that  in  the  Madras  province  we  have  examples  of 
co-operative  villages  founded  by  the  spontaneous  initiative  of  the  culti- 
vators. He  adds,  however,  that  these  villages  are  always  the  product  of  a 
privileged  colonising  enterprise,  effected  under  the  patronage  of  chiefs,  or  as 
a  fruit  of  conquest  {loc.  cit.,  pp.  366,  543).  Substantially,  then,  we  have 
always  to  do  with  forced  aggregations,  and  the  same  may  be  said  of  the  ex- 


The  Forms  of  Income  85 

manner  and  imperiously  associates  the  labour  of  its  members, 
and  also  enforces  upon  them  the  use  of  their  instruments  of 
production.  In  Egypt,  at  first  the  building  of  the  pjramids,  and 
later  the  great  works  of  irrigation,  were  accomplished  by  labour 
coercively  associated  under  the  yoke  of  the  Pharaohs,  that  is 
to  say,  of  the  state  (which  in  this  phase  is  always  an  emana- 
tion of  the  labourers) ;  whilst  the  innumerable  canals  which 
intersect  the  Transcaucasian  region,  and  the  dykes  of  eastern 
Friesland,  date  from  a  time  when  the  native  population  was 
subjected  to  an  iron  despotism,  organising  and  associating 
their  productive  forces.^  At  a  later  date  the  medieval  corpora- 
tion (guild)  imposes  on  the  individual  artisans  the  method  of 
work  and  that  of  the  use  of  the  technical  instruments,  and 
co-ordinates  and  discipMnes  their  forces  ;  and  the  same  func- 
tion is  fulfilled  in  our  own  day  by  the  directive  organs  of  co- 
operative societies  for  production.  Such  authoritative  coercion 
to  the  association  of  labour  as  a  rule  impHes  the  permanent 
assignment  of  each  producer  to  a  given  sphere  or  portion  of 
the  collective  production. 

However  fully  characterised  by  rigorous  and  vexatious 
restrictions  may  be  the  coercion  which  thus  discipHnes  the 
producers,  it  must  in  the  first  place  be  noted  that  such  coercion 
diminishes  in  intensity  with  every  successive  phase  of  un- 
differentiated income.    If,  in  fact,  in  the  communistic  economy 

amples  given  by  Wakefield  {A  View  of  Colonisation,  London,  1849,  pp.  178-9), 
and  by  Chevalier  {Lettres  sur  VAmerique  du  Nord,  Paris,  1837,  II,  pp.  286, 
et  seq.),  of  free  association  among  the  first  American  colonists,  or  on  the  fron- 
tiers of  the  nascent  American  states,  as  also  of  the  genius  for  co-operation 
which  has  been  reported  to  exist  among  the  workers  of  the  island  of  Hawaii 
{Bulletin  of  the  Department  of  Labor,  July,  1903) ;  whereas  in  Africa,  on  the 
other  hand,  a  federation  of  the  Kaffirs  appears  inconceivable  (Bryce,  Impres- 
sions of  South  Africa,  London,  1896). 

^  Marx,  Le  Capital,  I,  p.  145  ;  Sieber,  loc.  cit.  ;  Metchnikoff,  La  civilisation 
et  les  grands  fleuves  historiques,  Paris,  1889,  p.  233  ;  Hilgard,  The  Causes  of  the 
Development  of  Ancient  Civilisations  in  Arid  Countries,  "  North  Amer.  Rev.," 
1902,  pp.  109,  et  seq.  In  Rome,  also,  in  very  early  times,  the  great  public  works 
are  performed  by  the  plebeians,  forcibly  associated  under  the  despotism  of 
the  kings  ;  and  according  to  Mommsen  and  certain  recent  historians,  it  was 
precisely  the  rebellion  against  this  coercion  which  induced  the  coaUtion 
between  the  plebeians  and  the  patricians,  and  led  to  the  founding  of  the  re- 
public. A  forced  association  of  labour,  disciplined  by  the  collective  authority, 
exists  also  in  Old  Japan  (Fukuda,  Gesellschaftliche  Entwicklung  in  Japan, 
Stuttgart,  1900,  pp.  32,  et  seq.)  ;  and  the  same  thing  exists  to-day  among 
the  natives  of  Erythrea  (Gioli,  U  agricoltura  -nelV  Eritrea,  Rome,  1903, 
pp.  45-9).  Other  examples  will  be  found  in  Beauchet,  Histoire  de  la  propri6t6 
fonciere  en  Suede,  Paris,  1904  ;  and  in  Maitland,  Domesday  Book  and  Beyond, 
London,  1897,  pp.  340,  et  seq. 


86  The  Economic  Synthesis 

the  coercion  is  exercised  by  the  public  authority,  and  is  there- 
fore endoAved  with  the  maximum  force  and  intensity,  in  the 
craft-guild  it  is  exercised  in  part  by  the  law,  and  in  part  by  the 
master-craftsmen  directing  the  production  ;  and  precisely  on 
account  of  this  composite  character,  wherein  an  individual 
element  is  intermingled,  it  already  presents  a  less  inflexible 
rigidity  and  a  less  harsh  crudity.  But  the  coercion  is  also  less 
sensible  and  less  acute  in  the  co-operative  economy,  for 
here,  in  addition  to  being  partial  or  restricted,  this  coercion 
has  an  exclusively  private  character.  It  may,  therefore, 
be  affirmed  that  the  economy  of  the  undifferentiated  in- 
come proceeds  from  a  state-economy  to  a  contractual 
economy,  inasmuch  as  coercion  emanating  from  the  state 
or  organised  by  law  is  always  advantageously  replaced  by 
coercion  of  a  private  character  sanctioned  by  free  contract ; 
and  to  such  an  evolution  there  corresponds  a  diminishing 
intensity  of  the  coercion  displaying  itself  in  such  an  economic 
form. 

On  the  other  hand,  in  this  form  of  income,  the  coercion 
imposed  on  the  producers,  for  the  very  reason  that  it  proceeds 
directly  or  indirectly  from  the  associated  labourers  themselves, 
is  always  exercised  in  their  own  interest,  or  for  the  better 
organisation  of  their  labour,  in  order  to  increase  the  total  and 
individual  product.  Above  aD,  then,  this  coercion  does  not 
aim  at  creating  a  predominance  of  one  over  the  others,  or  at 
the  institution  of  economic  privilege  ;  on  the  contrar}^  it  is 
directed  towards  the  overthrow  of  any  virtual  privilege,  at  the 
ehmination  of  any  inequality  ;  in  sum,  its  purpose  is  to  sanction 
and  to  defend  that  equivalence  of  incomes  which  free  land 
itself  produces.* 

A  constant  phenomenon  in  all  the  forms  of  undifferentiated 
income  is  the  energetic  intervention  of  law  or  of  the  collectivity 
in  order  to  create  and  jealously  to  maintain  the  average 
condition  and  the  economic  equivalence  of  the  associates. 
Thus,  in  primitive  Denmark,  when  a  village  is  founded,  each 
family  is  allotted  an  equal  share  in  territory  of  a  given  fertihty, 
while  the  lots  that  happen  to  be  comparatively  sterile  are,  in 

*  "  The  state  ia  a  power  whose  aim  is  enfranchisement  (from  the  dominion 
of  individual  interests)"  (Ratzenhofer,  Die  aoziologische  ErkenntniSt  Leipzig, 
1898,  p.  203). 


The  Forms  of  Income  87 

compensation,  of  larger  extent. ^  In  Sweden,  specific  arrange- 
ments are  made  in  order  to  secure  that  the  various 
owners  may  be  placed  in  conditions  of  perfect  equahty  2 ; 
whilst  in  Germany,  in  France,  and  in  Wales,  zones  of  land 
varying  in  fertility  are  divided  into  lots,  and  each  owner  is 
assigned  a  lot  in  every  zone.^  Yet  more,  we  find  a  number 
of  the  most  detailed  regulations  aiming  at  the  eMmination 
and  prevention  of  every  possible  differentiation  among  the 
associates.  Thus,  the  obUgation  of  hospitafity  is  imposed 
upon  all  alike  ;  the  passer-by  is  allowed  the  free  enjoyment  of 
the  fruit  of  another's  vines  ;  the  duty  of  rendering  help  to 
their  neighbours  is  imposed  upon  the  communists  ;  the  man 
whose  wife  bears  no  son  must  temporarily  cede  her  to  his 
brother  or  other  near  relative  ;  etc.* 

Prescriptions  no  less  jealously  detailed,  aiming  at  the 
maintenance  of  economic  equality  among  the  associates,  are 
met  with  in  the  craft-guild.  This  economic  form  is  already 
found  in  many  cases  within  an  agricultural  community,  or 
as  an  emanation  from  such  a  community.  Thus,  in  Belgium, 
the  primitive  nucleus  of  the  industrial  community  is  a  rural 
corporation  (guild)  ;  and  again  the  Charter  of  Antwerp  of  the 
year  1291  secures  for  the  inhabitants  of  the  city  the  absolute 
enjoyment  of  free  land  in  the  neighbourhood.  It  is  therefore 
not  to  be  wondered  at  if  the  civic  corporation  of  the  early 
times  thus  presents  obvious  and  intimate  analogies  with  the 
ancient  mark,  and  if,  at  the  same  time,  all  the  decrees  of  such 
a  corporation  are  inspired  with  the  aim  of  maintaining 
economic  equality  among  its  members.  But  this  aim  persists 
at  a  later  date  when  the  guild  has  been  completely  separated 
from  its  primitive  rural  foundation.  The  purpose  is,  in  fact, 
that  no  member  of  the  guild  shall  have  any  advantage  over 
the  others.  No  one  is  allowed  to  buy  for  himself  alone  all  the 
raw  material  brought  to  the  market,  but  he  is  expected  to  leave 
a  part  for  his  feUows.  The  guild  specifies  the  price  of  the  raw 
material,  which  must  be  identical  for  all  the  manufacturers, 

^  Landau,  Die  Territorien,  Hamburg  and  Gotha,  1854,  pp.  30,  33.  The 
same  practice  obtains  among  the  natives  of  Erythrea  (Gioh,  Bollettino  delV 
emigrazione,  1906,  No.  16,  pp.  271-2). 

'^  Beauchet,  Histoire  de  la  propriete  fonciere  en  Su^de,  Paris,  1904,  passim. 

'  Seebohm,  French  Peasant  Proprietorship,  "  Economic  Journal,"  March, 
1891.  *  Maurer,  Dor/verjasaung,  I,  p.  340. 


88  The  Economic  Synthesis 

The  master-craftsman  must  not  practise  more  than  one  craft, 
he  must  not  own  more  than  a  h  mi  ted  number  of  looms,  and 
he  must  not  keep  more  than  one  craftsman,  journeyman,  or 
apprentice  ;  and  he  is  even  forbidden  to  enter  into  association 
with  another  master-craftsman,  or  to  work  in  the  same  house 
with  another.  Nor  is  this  all.  Those  engaged  in  each  of 
the  successive  stages  of  the  industry,  corresponding  to  the 
successive  stages  of  elaboration  of  the  product,  must  partici- 
pate in  the  total  product  in  proportion  to  the  quantity  of 
labour  which  they  have  respectively  contributed  ;  and  within 
each  sphere  of  production,  the  distribution  of  the  product  is 
effected  in  accordance  with  the  work  done,  in  order  to  insure 
the  economic  equivalence  of  the  producers.  It  frequently 
happens  that  the  master-craftsman  and  the  journeyman 
divide  the  product  in  equal  shares  ;  and  this  mode  of  distribu- 
tion is  still  found  among  the  carpenters  of  Mulhouse  in  the 
year  1457,  while  at  Basle  it  lasted  till  as  late  as  1711.  Where 
there  is  any  difference  between  the  remuneration  of  the  master- 
craftsman  and  that  of  the  journeymen,  the  law  intervenes  to 
impose  rigid  limits  upon  this  difference  ;  and  as  a  rule  the 
difference  in  remuneration  which  the  master-craftsman  may 
obtain  by  his  work  of  saving  and  direction  must  not  exceed 
one -fourth  of  the  product.  It  is  obvious,  then,  that  this 
superiority  of  remuneration  of  the  master-craftsman  over  that 
of  the  journeyman  is  precarious  in  character  ;  for  the  journey- 
man remains  in  that  condition  from  thirteen  to  sixteen  years 
only,  then  he  becomes  a  craftsman,  and  in  the  course  of  a  year 
(if  he  has,  as  is  always  the  case,  sufficient  capital  to  establish 
an  undertaking  of  his  own)  he  rises  to  the  condition  of  master- 
craftsman. 

Great  vigilance  is  exercised  to  provide  that  capital  shall  not 
be  transformed  into  an  independent  means  of  acquisition,  or 
become  for  its  owner  the  source  of  a  privileged  or  superior 
remuneration.  If  we  often  find  in  the  Middle  Ages  that  the 
worker  is  directly  employed  by  the  consumer  with  the  aid  of 
capital  advanced  by  the  latter,  this  is  because  it  is  not  held 
desirable  that  the  dead  material  should  become  a  source  of 
acquisition,  or  that  the  capital  should  continue  to  provide 
income  increasing  without  end.^    With  like  intent  in  England, 

*  Biicher,  Gewerhe,  in  "  Handwdrterb.  der  Staatsvv." 


The  Forms  of  Income  89 

in  France,  and  in  Germany,  it  is  forbidden  to  one  who  desires 
to  found  an  independent  enterprise  to  receive  on  loan  from  a 
private  individual  the  sum  primarily  needed  for  the  acquire- 
ment of  the  instruments  of  production.  And  it  is  prescribed 
that  this  sum  shall  be  advanced  to  him  exclusively  by  the 
guild  or  by  the  city,  the  loan  being  accompanied  with  the 
consecrated  formula,  8i  fortuna  sibi  arridebit,  pagabit.^  The 
manufacturer  can  never  gain  any  advantage  for  himself  by 
lending  to  another  his  own  looms  or  buildings.  If  it  should 
happen  that  a  loan  is  effected  by  contract,  it  is  understood 
that  the  lender  is  not  to  be  entitled  to  the  benefit  of  any 
interest  upon  this  loan  ;  for,  says  Beaumanoir  of  interest, 
Nul  loi  ne  le  doit  faire  payer. — ^Thus,  the  most  diverse  laws 
combine  in  the  supreme  aim  of  maintaining  economic  equiva- 
lence among  the  associated  producers. 

A  similar  series  of  phenomena  is  manifested  in  relation  to 
that  form  of  undifferentiated  income  which  flourishes  to-day, 
however  deformed  and  corrupted  by  the  solvent  influence  of 
that  antagonistic  form  of  income  in  whose  midst  it  is  con- 
demned to  vegetate.  In  fact,  the  contemporaneous  co- 
operative economy  itself,  where  it  is  able  to  exist  without 
being  forced  to  pay  tribute  of  exhausting  dues  to  landlords 
and  money-lords,  succeeds  in  maintaining  a  comparative 
equality  among  its  associates,  or  in  preventing  a  too  salient 
divergence  among  their  incomes,  either  by  forbidding  the 
co-operators  to  contribute  unequal  quantities  of  capital,  or 
else  by  equahsing  their  shares  in  the  distribution  of  profit. 
Thus  the  co-operative  societies  of  Piedmont,  which  depart 
less  than  those  of  other  regions  of  Italy  from  the  tj^pical  form 
of  undifferentiated  income,  maintain  comparative  equality 
among  their  members,  and  do  not  assign  to  capital  any  prefer- 
ential share  in  the  distribution  of  the  profits.  ^ 

Thus,  in  the  regime  of  undifferentiated  income,  in  all  its 
forms,  the  institution  constraining  to  the  association  of  labour 
brings  into  being  a  series  of  laws  or  prescriptions  decreeing 
the  economic  equahty  of  the  producers.  But  this  equality, 
imposed  by  authority,  has  to  encounter  a  formidable  obstacle 

^  E.  de  Girard,  Histoire  de  Viconomie  sociale  jusqu'd  la  fin  du  XVI*  siede, 
Paris,  1900,  pp.  128-9. 

*  Fenicia,  La  cooperazione  in  Piemonte,  Turin,  1901,  pp.  186,  et  aeq. 


90  The  Economic  Synthesis 

in  the  individual  egoism  of  the  associates,  who  endeavour  in 
every  possible  way  to  attain  to  a  privileged  and  superior 
position.  Therefore,  in  each  of  the  three  forms  of  undiffer- 
entiated income,  sooner  of  later,  though  in  various  different 
ways,  the  original  equahty  disappears,  and  inequality  of 
incomes  is  estabHshed. 

Even  in  the  primitive  community,  inequahty  of  incomes 
is  not  slow  to  manifest  itself.  In  fact,  the  very  cause  which 
led  to  the  constitution  of  the  primordial  associations,  that  is  ta 
say  the  increase  of  population,  renders  necessary  the  conquest 
of  new  territories,  and  therewith  the  destruction  of  the  original 
equality  of  possessions.  Vainly  does  the  legislator  attempt  to 
ward  off  the  danger,  by  forbidding  or  restricting  the  aUenation 
of  the  land  ;  for  the  very  shackles  thus  imposed  can  only 
serve  to  accentuate  the  inequality.  For  example,  in  the 
Burgundian  laws  (tit.  84,  c,  1)  :  "  Quia  cognovimus  Bur- 
gundiones  sortes  suas  nimia  facilitate  distrahere,  hoc  praesenti 
lege  credidimus  statuendum,  ut  nulli  vendere  terram  suam 
liceat,  nisi  illiy  qui  alio  loco  sortem  autem  possessiones  habeat,''^^ 
By  thus  forbidding  the  sale  of  land  to  persons  who  do  not 
already  possess  it,  the  law  evidently  succeeds  in  accentuating 
the  existing  inequality  in  the  matter  of  landed  property  ;  and 
the  inequahty  in  landed .  property  involves  inequality  in 
common  rights,  since  the  measure  of  these  is  proportionate  to 
the  extension  of  landed  property.  Economic  inequahtj^,  thus 
initiated,  then  enables  the  more  favoured  members  of  the 
community  to  exempt  themselves  from  labour,  or  to  procure 
a  genuine  differentiated  income  of  their  own,  as  happens  in 
the  most  striking  way  in  Wales.  Here,  in  fact,  the  richer 
members  of  the  community  contribute  to  the  work  by  lending 
oxen,  or  the  plough,  or  the  greater  part  of  these,  but  contribute 
no  labour  ;  while  the  poorer  ones  provide  a  lesser  part  of  the 
instruments  of  labour  and  furnish  the  labour  itself  ;  the 
product  is  divided  among  them  in  predetermined  proportions. 
In  this  way  the  richer  members  of  the  community  obtain  an 
income  without  labour.  But  from  this  hybrid  form,  in  which 
the  community  permanently  loses  its  character  of  equahty, 
there  develops  a  more  definite  form,  owing  to  the  fact  that  the 
wealthier  members  leave  the  community  altogether.    In  fact, 

^  Maurer,  Eirdeitung  in  die  Frohn,  etc.,  und  Markenverfassung,  p.  209. 


The  Forms  of  Income  9 1 

those  who  have  been  able  to  get  possession  of  a  larger  area  of 
land  are  not  slow  to  leave  the  community  more  or  less  abruptly, 
or  to  segregate  their  own  possessions,  forbidding  their  former 
associates  to  pasture  their  animals  on  these  lands,  and  gaining 
for  themselves  the  right  to  cultivate  them  according  to  their 
own  pleasure,  without  having  to  regard  the  vexatious  sanctions 
of  the  social  authority. ^  In  this  way,  economic  inequality  is 
plainly  and  definitively  estabUshed. 

A  similar  evolution  occurs  within  the  corporative  economy. 
In  this,  in  hke  manner,  the  primitive  equality  of  incomes  is 
gradually  undermined,  for  the  master-craftsman  eventually 
reduces  his  former  fellow-workers  and  comrades  to  a  sort  of 
tempered  slavery,  and  thus  procures  for  himself  'ptr  fas  et 
nefas  a  higher  remuneration  which  enables  him  to  withdraw 
from  labour  and  to  confine  himself  to  the  receipt  of  income. 

Finally,  the  same  phenomena  recur  in  the  co-operative 
economy.  Everywhere  co-operative  associations,  initiated 
under  the  auspices  of  democratic  equahty,  degenerate  into 
institutions  of  privilege,  and  become  characterised  by  the  most 
marked  inequality. — The  capital  passes  into  the  hands  of  a 
small  minority  of  the  associates,  who,  thanks  to  this,  give  up 
working,  whilst  the  great  majority  of  the  associates  do  not 
contribute  any  portion  of  the  capital,  and  ar6  therefore 
reduced,  in  substance,  to  the  receipt  of  subsistence  alone.  ^ 

In  all  the  forms,  therefore,  of  undifferentiated  income,  the 
original  equaHty  of  incomes,  sanctioned  by  the  coercive  action 
of  the  social  authority,  does  not  long  resist  the  solvent  influence 
of  individual  egoism  ;  for  this,  in  defiance  of  the  equaHsing 
sanctions  of  the  organising  power,  effects,  sooner  or  later,  the 
differentiation  of  individual  incomes,  thus  digging  the  grave 
of  this  economic  form,  and  effecting  the  inevitable  passage 
to  that  categorically  opposed  form  which  we  shall  now  pro- 
ceed to  study. 

§  3.  Differentiated  Income 

Tlie  characteristic  features  of  differentiated  income  are 
absolutely  contrasted  with  those  we  have  just  been  considering 

^  Maurer,  Dorfverfassung,  p.  155. 

'  Bourguin,  Les  syatemes  socialistea  et  revolution  iconomique,  Paris,  1904, 
p.  ill. 


92  The  Economic  Synthesis 

as  proper  to  undifferentiated  income.  In  the  first  place,  in 
differentiated  income,  the  labourer,  though  he  contributes 
nothing  but  labour,  must  obtain  precisely  as  much  as  he 
obtains  in  undifferentiated  income  with  labour  and  unitary 
technical  capital — ^that  is  to  say,  subsistence.  We  shall  see 
later  that  sometimes  he  obtains  less  ;  but  in  normal  conditions, 
such  as  we  are  now  considering,  the  labourer  must  obtain  the 
entirety  of  subsistence,  that  is  to  say,  the  integral  product  of 
labour  and  of  unitary  technical  capital ;  and  further,  since  he 
does  not  possess  any  store  of  the  necessaries  of  life,  he  must 
receive  this  subsistence  prior  to  the  completion  of  the  product. 
— ^In  such  conditions,  therefore,  the  labourer,  providing  a 
given  quantity  of  pure  labour,  receives  in  exchange,  and  in 
advance,  the  product  of  this  same  quantity  of  labour  and  in 
addition  that  of  a  technical  capital ;  that  is  to  say,  he  receives 
more  than  he  gives,  or  obtains  a  part  of  the  product  onerously, 
and  a  part  gratuitously.  On  the  other  hand,  the  product  of 
the  association  of  labour,  income,  no  longer  goes  to  the 
labourer,  but  to  another  individual,  namely  to  him  who 
advances  the  labourer's  subsistence.  In  such  conditions, 
therefore,  the  product  of  the  association  of  labour  is  no  longer, 
as  in  the  case  of  undifferentiated  income,  a  gratuitous  surplus 
accruing  to  the  domain  of  labour,  but  is  a  more  or  less 
extensive  remuneration  for  the  advance  made  to  the  labourer 
by  another  individual,  which  advance  enables  the  labourer 
to  obtain  a  gratuitous  increment  to  the  product  of  his  pure 
labour.  Whereas,  then,  in  the  case  of  undifferentiated  income, 
the  product  of  the  association  of  labour  is  in  its  integrity  a 
gratuitous  accruement  received  by  the  labourer  ;  in  the  case 
of  differentiated  income  it  goes,  at  least  in  part,  to  compensate 
for  a  gratuitous  advance  made  by  the  non-labourer  to  the 
labourer.^ 

*  In  his  Analiai  (I,  p.  32),  the  author  has  previously  pointed  out  that  where 
the  labourer  who  contributes  to  production  nothing  but  his  labour  receives 
in  advance  more  than  the  anticipated  equivalent  of  the  product  of  pure 
labour  (which  anticipated  equivalent  is  already  less  than  that  product),  his 
wage  includes  a  surplus-payment.  A  fortiori,  therefore,  his  wage  includes  a 
surplus  payment,  if  the  worker  receives  in  advance  the  product  of  pure 
labour  ;  and  all  the  more  is  this  the  case  if  the  worker  receives  in  advance  the 
product  of  labour  and  of  unitary  technical  capital. 

Nor  can  it  be  said  that  the  labourer  who,  in  the  case  of  undifferentiated 
income,  contributes  labour  and  unitary  technical  capital  and  obtains  a  sub- 
sistence, will  find  himself  in  an  inferior  position  as  compared  with  the  labourer 


The  Forms  of  Income  93 

The  fact  that  in  differentiated  income  the  labourer  con- 
tributes nothing  but  his  labour,  impHes  per  se  the  fact  that  in 
this  economic  form  the  productive  labourer  never  owns  the 
means  of  production.  Now,  if  the  labourer  neither  has  nor 
can  have  ownership  of  the  means  of  production,  this  impHes 
that  it  is  impossible  for  him  to  produce  these  means  on  his 
own  account,  or  to  transfer  himself  on  his  own  account  to 
land  without  value.  It  follows  that  the  essential  fact  under- 
lying differentiated  income  is  that  the  productive  labourers 
are  categorically  excluded  from  access  to  the  land.^ 

Now  the  denial  to  the  labourer  of  access  to  the  land,  which 
is  the  essential  foundation  of  this  form  of  income,  is  obtained, 
first  of  all,  by  denying  to  the  labourer  gratuitous  access  to  the 
land,  or  to  an  area  of  land  sufficient  to  furnish  the  means  of 
production.  But  access  to  the  land  may  be  direct  or  indirect. 
It  may  be  that  the  land  is  accessible  only  to  those  who  have  the 
power  of  directly  occupying  it,  on  the  other  hand,  it  may  be 
that  the  land  is  always  accessible  to  all  those  who  have  free 
access  to  another  productive  element,  and  in  this  case,  access 
to  this  last  element  is  indirect  access  to  the  land. — Hence  the 
denial  of  access  to  the  land  implies  the  denial  to  the  labourer 
either  of  direct  access  or  of  indirect  access  ;  this  meaning  in 
the  latter  case  that  the  labourer  is  denied  access  to  the  element 
which  'per  se  gives  access  to  the  land. 

But  the  denial  to  the  labourer  of  gratuitous  access  to  the 
land,  does  not  suffice  by  itself  to  exclude  the  labourer  from  the 
ownership  of  land  ;  for  that  which  is  not  gratuitous  may  be 
bought,  and  it  is  not  excluded  from  possibility  that  the  labourer 

in  the  case  of  differentiated  income,  who  obtains  as  much  when  contributing 
labour  alone,  and  that  the  former  will  transfer  himself  to  the  condition  of 
the  latter.  For,  in  the  other  scale,  we  must  place  the  desire  for  independence 
{Cost.  Ec.  od.,  p.  663,  note)  ;  and  we  must  also  remember  that  the  former 
can  always  increase  his  product  by  means  of  the  association  of  labour,  in 
virtue  of  which  he  can  gratuitously  effect  an  increment  of  the  product,  whereas 
the  wage-labourer  must  hand  over  the  product  to  him  who  has  advanced  the 
capital.  If  the  independent  labourer  does  not  associate  his  labour  with  that 
of  others,  this  is  due  simply  to  the  reluctance  which  he  experiences  with  regard 
to  the  association  of  labour,  is  due,  that  is,  to  his  own  will  alone  j  and  to  him 
alone  is  due  the  scanty  nature  of  the  product  he  obtains. 

^  "  It  is,  indeed,  a  gift  of  nature  that  men  can  raise  more  food  than  the  lowest 
quantity  that  they  could  maintain  and  keep  up  the  existing  population  on 
but  surplus  produce  generally  means  the  excess  of  the  whole  price  of  a  thing 
above  that  part  of  it  which  goes  to  the  labourers  who  made  it ;  a  point  which 
is  settled  by  human  arrangement  and  not  fixed  by  nature." — Observations  on 
Certain  Verbal  Disputes  in  Pol.  Ec.  (Anon.),  London,  1821,  pp.  74-5. 


94  The  Econo7nic  Synthesis 

may  save  upon  his  subsistence  (which  does  not  of  necessity 
coincide  with  the  strict  necessaries  of  hfe)  sufficient  wealth  to 
buy  the  land,  or  to  buy  the  productive  element  which  will  give 
him  access  to  the  land.  Now,  to  avoid  this  dangerous  eventu- 
ality, it  is  necessary  that  the  maximum  saving  possible  to  the 
labourer  out  of  his  remuneration  should  be  inferior  to  what- 
ever may  be  the  value  of  the  area  of  land  cultivable  by  the 
labour  of  a  single  man,  or  to  the  value  of  the  productive 
element  which  will  give  him  access  to  that  area  ;  or,  to  put 
the  matter  more  concisely,  that  it  should  be  inferior  to  the 
value  of  access  to  the  land.  Let  R  represent  the  maximum 
saving  of  the  worker,  and  V  the  value  of  access  to  the  land, 
the  persistence  of  differentiated  income  demands  as  a  primary 
and  necessary  condition  the  permanence  of  the  equation  : 

V=R-fx 

Now  this  equation,  when  it  is  not  the  spontaneous  outcome  of 
the  economic  order  (for  in  this  case  we  have  the  spontaneous 
economy),  can  be  obtained  in  two  ways  only  ;  either  by 
diminishing  R,  the  savings  of  the  worker,  which  can  only  be 
effected  by  lowering  his  remuneration  (the  systematic  economy); 
or  by  raising  V,  the  value  of  access  to  the  land  (the  automatic 
economy). 

Whichever  of  the  two  methods  here  specified  is  employed 
to  maintain  the  equation  under  consideration,  this  artificial 
action  involves  in  any  case  a  certain  expenditure,  a  sterilisa- 
tion of  a  part  of  capital  and  a  part  of  labour,  which  are 
diverted  from  production  and. are  confined  to  the  technically 
unproductive  function  of  effecting  a  supervaluation  of  direct 
or  indirect  access  to  the  land,  or  to  that  of  lowering  the  value 
of  labour.  The  necessary  result  of  such  a  proceeding  is  to 
depress  income  below  the  figure  which  it  would  otherwise 
attain,  and  it  will  be  obvious  that  the  recipients  of  income, 
whose  direct  wish  is  to  elevate  income  to  its  maximum  figure, 
wiU  not  spontaneously  have  recourse  to  a  process  which  leads 
to  the  opposite  result. — It  is  true  that  this  process  is  essential 
to  ensure  the  vitalitj^  of  differentiated  income  ;  but  this 
function  is  dependent  upon  the  working  of  a  mechanism  that 
forms  too  recondite  a  part  of  the  social  machiner}^  for  it  to  be 
known  and  felt  by  the  recipient  of  income  or  to  constitute  the 


The  Forms  of  Incofne  95 

immediate  incentive  to  his  economic  conduct.  Hence,  the 
recipient  of  income  first  of  all  organises  the  factors  of  produc- 
tion in  such  a  way  as  to  obtain  the  maximum  income,  without 
paying  any  attention  to  the  fact  that  the  value  of  access 
to  the  land  is,  or  may  become,  inferior  to  the  maximum 
saving  of  the  labourer.  But  as  soon  as  the  value  of  access  to 
the  land  becomes  inferior  to  the  accumulated  saving  of  the 
labourer,  a  part  of  the  labourers  transfer  themselves  on  their 
own  account  to  the  land,  abandoning  the  capital  which  has 
hitherto  employed  them,  and  depriving  it  of  income.  Now 
part  of  this  capital,  thus  deprived  of  income,  devotes  itself  to 
production,  and  therewith  increases  the  demand  for  the  pro- 
ductive elements,  and  hence  increases  also  the  demand  for  that 
element  which  concedes  access  to  the  land,  and  therefore 
increases  the  value  of  such  access  ;  whilst  the  other  part  of  this 
capital  stagnates  in  the  form  of  unproductive  capital,  which 
either,  by  diminishing  the  rate  of  profit  on  productive  capital, 
slackens  saving  and  thus  ultimately  effects  a  diminution  in 
subsistence,  or  else  directly  seeks  for  profit  at  the  expense  of 
subsistence,  and  in  any  case  diminishes  the  savings  of  the 
labourer. — ^Thus  the  violation  of  the  equation  V=R+x  sets 
in  motion  in  two  different  ways,  independently  of  the  will  and 
the  conscious  purposes  of  the  recipient  of  income,  forces  which 
inevitably  tend  to  the  re-establishment  of  that  fundamental 
equation,  and  there mth  of  the  equilibrium  of  differentiated 
income. 

In  this  way,  the  denial  of  free  land,  the  foundation  of  differ- 
entiated income,  is  maintained  by  a  twofold  process  :  the 
exclusion  of  the  labourer  from  gratuitous  access  (direct  or 
indirect)  to  the  land,  and  his  exclusion  from  onerous  access 
to  the  land,  this  latter  being  secured  by  the  maintenance  of  a 
permanent  superiority  of  the  value  of  such  access  over  the 
accumulated  savings  of  the  labourer. — ^This  twofold  process 
presents  itself  in  economic  evolution  under  three  forms  very 
clearly  distinguished  one  from  another,  corresponding  to  as 
man}^  clearly  distinguishable  forms  of  differentiated  income, 
namely,  slavery,  serfdom,  and  the  wage  system. 

As  long  as  there  exist  lands  of  high  fertility  and  unrestricted 
in  quantity,  and  as  long  as  the  total  appropriation  of  the 
territory  is  therefore  physically  impossible,  the  producer,  if 


96  The  Economic  Synthesis 

he  is  legally  a  freeman,  that  is  to  say,  if  he  belongs  to  himself, 
always  has  the  power  of  estabhshing  himself  on  his  own  account 
upon  an  available  area  of  land.  In  other  words,  in  such 
conditions,  the  labourer  is  the  productive  element  whose 
ownership  per  se  throws  open  access  to  the  land.  If,  there- 
fore, in  such  conditions,  it  is  wished  to  deny  to  the  labourer 
ownership  of  the  land,  it  is  necessary  to  deny  to  him  the 
ownership  of  himself  ;  he  must,  that  is  to  say,  be  reduced  to 
slavery.  But  the  slave  receives  a  peculium,  and  as  soon  as 
his  pecuHum  has  been  saved  to  form  a  sum  equivalent  to  the 
value  of  the  slave,  this  latter  hastens  to  buy  his  freedom, 
thus  annihilating  differentiated  income.  Thus  the  persistence 
of  differentiated  income  can  only  be  assured  b}^  seeing  to  it 
that  the  value  of  the  slave  shaU  exceed  the  quantity  of  his 
savings,  whatever  this  may  be.  This  may  be  effected,  either 
by  means  of  an  artificial  rise  in  the  value  of  the  slave,  or  by 
means  of  an  artificial  reduction  in  his  pecuhum.  The  former 
method  is  the  one  usually  employed  in  the  ascendent  and 
more  prosperous  period  of  the  slave-economy,  whilst  the  latter 
method  is  commoner  in  periods  of  decHne  and  retrogression. 
In  any  case,  the  adoption  of  either  method  is  the  outcome  of 
the  working  of  inevitable  necessity  :  for  capital,  being  deprived 
of  labourers  and  of  income,  either  devotes  itself  to  production, 
which  increases  the  demand  for  slaves,  and  hence  sends  up 
their  value  ;  or  else  stagnates  as  unproductive  capital,  which 
diminishes  the  profit  of  productive  capital,  slackens  productive 
accumulation,  and  depresses  the  subsistence  of  the  labourer. 
Such  is  the  sequence  of  phenomena  in  the  slave-economy, 
ahke  in  its  earliest  and  classical  manifestation  in  the  Graeco- 
Roman  world,  and  in  its  recent  transient  appearance  in  tlie 
young  society  of  the  new  world. — Referring  the  reader  in  this 
connexion  to  the  circumstantial  account  we  have  elsewhere 
given  of  these  interesting  phenomena,  it  will  suffice  to  add 
here  that  the  most  recent  researches  furnish  incontestable 
proof  of  our  proposition.  In  the  southern  States  of  the 
American  Union,  according  to  the  report  of  a  conscientious 
investigator,  during  the  slave-holding  regime,  the  price  of  a 
slave  ultimately  rose  to  2000  dollars,  yielding  to  the  slave- 
traders  from  33  to  50%  profit.— Between  1845  and  1860, 
\diile  the  peculium  of  the  slave  rose  to  as  much  as  150  and 


The  Forms  of  Income  97 

even  200  dollars  per  annum,  the  price  of  slaves  increased  by 
100%  causing  great  distress  to  the  planters.^  Further,  the 
value  of  the  slaves  rises  while  the  price  of  cotton  dechned,  so 
that  the  value  of  the  slaves  increases  to  an  extent  dispro- 
portionate to  the  advantage  which  can  be  derived  from 
them.  This  shows  that  an  element  of  speculation  enters  into 
the  value  of  the  slave,  or  that  there  is  a  hyper  valuation  of  the 
slave.  TMs  is  the.  central  phenomenon  of  slavery  ;  and  it  is  to 
this,  far  more  than  to  the  indolence  of  slave  labour,  that  is 
due  the  low  productivity  of  slave-states,  the  perennially 
unstable  equilibrium  of  the  slave-holding  enterprise,  the 
decHne  of  th^  system,  and  its  inevitable  ruin.^  Similarly  in 
Rome,  where  the  purchase  of  freedom  is  regulated  by  law,  and 
is  not  infrequently  effected,  the  slave-owner  speculates  upon  the 
desire  of  his  slaves  to  gain  their  freedom  ;  arranging  that  those 
who  succeed  in  freeing  themselves  can  do  so  only  by  means 
of  privations  and  hard  work.  One  of  the  reasons  for  the  ineffi- 
ciency of  slave-labour,  is  that  efficiency  on  the  part  of  the  slave 
only  serves  to  raise  his  market  price,  and  therefore  to  render 
it  more  difficult  for  him  to  obtain  his  freedom.  During  the 
ascendent  period  of  the  Roman  economy  we  see  the  price  of  a 
slave  attain  fantastic  figures  ;  from  1260  francs  in  the  time  of 
Cato,  and  2000  francs  in  the  time  of  Columella,  it  rises  to  as 
much  as  12,000  francs  in  the  case  of  the  finer  and  more  intel- 
lectual labourers. 3  AVhen,  then,  in  the  decHning  period  of  the 
Roman  economy,  the  price  of  the  slaves  falls,  the  slave-owners 
set  themselves  vigorously  to  work  to  reduce  to  the  lowest 
possible  level  the  subsistences  of  the  labourers,  by  defrauding 
them  of  their  peculium.  Thus  in  Sicily,  the  enormous  number 
of  the  slaves  reduces  their  value  to  a  minimum,  and  this 
leads  the  slave-owners  to  diminish  the  pecuhum  and  gives 
rise  to  horrible  misusage  of  the  labourers,  and  this  leads  at 
length  to  the  fearful  revolt  of  Eunus. — ^In  Rome  itself,  the 
abnormal  depreciation  of  the  slaves,  the  outcome  of  the 
wars   of  conquest   which   brought   so   many    slaves    to    the 

^  Collins,  The  Domestic  Slave  Trade  of  the  Southern  States,  New  York,  1904. 

*  Philipps,  The  Economic  Coat  of  Slave  Holding^  "  Political  Quarterly,"  1905. 

^  Feuerherd,  Die  Entstehung  der  Stile  aus  der  Politischen  Oekonomiey 
Brunswick,  1902,  p.  128  ;  Lemonnier,  £tude  historique  sur  la  condition  privee 
des  affranchis  aux  trois  premiers  siecles  de  V empire  romain,  Paris,  1887, 
pp.  94,  et  eeq.;   Oliver,  loc.  cit.,  pp.   78,  131. 

H 


98  The  Economic  Synthesis 

Roman  market,  leads  the  slave-owners  to  reduce  the  pecu- 
lium,  and  to  treat  their  slaves  abominably,  circumstances 
which  play  no  Httle  part  in  provoking  the  servile  war.  Thus 
slave  income  oscillates  with  an  invariable  rhythm  between 
two  opposite  poles — ^the  super  valuation  of  the  slave,  and  the 
arbitrary  reduction  of  his  peculium. 

But  these  processes  become  continually  less  efficacious  in 
proportion  to  the  decline  of  the  slave  economy  ;  for,  while  the 
diminution  of  income  opposes  increasing  obstacles  to  the 
process  of  hyper  valuation  of  the  slave,  the  increasing  resistance 
of  the  slaves  renders  always  more  difficult  a  proportionate 
reduction  of  their  pecuHum.  Thus  the  moment  inevitably 
arrives  in  which  the  value  of  the  slave  becomes  less  than  that 
of  his  accumulated  pecuhum  ;  and  the  immediate  consequence 
of  this,  operating  through  the  redemption  of  the  labourer,  is 
the  irreparable  destruction  of  the  slave-income.^ 

The  problem  now  arises  as  to  how  differentiated  income 
may  be  effectively  transformed,  without,  however,  being 
radically  dislodged  from  its  previous  foundation.  In  fact,  in- 
asmuch as  the  unrestricted  supply  of  land  persists,  the  pro- 
ductive element  which  opens  access  to  the  land  remains  always 
the  man  himself ;  and  therefore  the  persistence  of  differentiated 
income  can  be  secured  only  by  maintaining  the  value  of  the 
man  in  excess  of  his  accumulated  savings.  But  it  is  at  the 
same  time  necessary  that  this  excess  of  value  should  be 
attained  without  having  recourse  to  that  process  of  super- 
valuation  of  the  man  which  has  proved  itself  incompatible 
with  the  normal  continuance  of  the  economic  order.  Now, 
how  can  this  be  effected  ?  Very  simply  :  by  making  the 
labourer  inseparable  from  the  land  which  he  cultivates,  in 
such  a  way  that  he  cannot  aHenate  himself  from  the  land,  nor 
buy  himself  except  in  connexion  with  the  land.  Thus  it 
becomes  impossible  for  the  labourer  to  redeem  himself  unless 
he  simultaneously  buys  the  land  which  he  cultivates  ;  and 
thus  the  value  of  the  man's  redemption  is  in  actual  fact  main- 
tained at  a  high  level,  without  its  being  necessary  to  have 

1  Philipps  has  been  good  enough  to  send  me  an  old  number  of  the  news- 
paper "  Federal  Union,"  of  Milledgeville,  Georgia,  dated  December  30th, 
1844,  in  which  the  prophecy  is  made  that  as  the  population  increases  the  em- 
ployment of  slave-labour  will  cease  to  be  profitable,  the  value  of  the  slave  will 
decline,  and  the  persistence  of  slavery  will  necessarily  become  impossible. 


The  Forms  of  Income  99 

recourse  to  the  costly  and  injurious  process  of  super  valuation 
of  the  labourer.  It  amounts  to  the  same  thing  as  if  a  com- 
modity which  has  hitherto  been  maintained  at  a  high  price, 
and  a  prohibitive  one  to  many  of  the  buyers,  by  means  of  an 
artificial  limitation  of  supply,  or  by  means  of  some  other  more 
or  less  costly  and  arbitrary  methods,  now  comes  to  be  on 
supply  in  the  market  at  a  normal  value,  but  at  the  same  time 
there  is  imposed  as  one  of  the  conditions  of  sale  the  concom- 
mitant  purchase  of  another  commodity  more  or  less  connected 
with  the  first.  In  this  way,  it  is  evident,  the  first  commodity, 
although  the  supply  may  have  increased,  or  no  longer  be 
restricted,  remains  beyond  the  powers  of  acquisition  of  those 
with  slender  purses  ;  in  order  words,  it  is  successfully  pro- 
hibited to  the  lesser  buyers,  without  any  need  for  recourse  to 
artificial  restrictions  or  to  positive  destruction  of  commodities. 
Such  is,  substantially,  the  artifice  which  secures  the  persistence 
of  differentiated  income  during  the  regime  of  the  serf -economy  ; 
for,  whilst  that 'economy  permits  the  value  of  the  man  to  fall 
to  its  natural  level,  it  at  the  same  time  makes  it  impossible 
for  him  to  redeem  himself,  except  in  connexion  with  the  land 
which  he  cultivates,  and  thus  effects  in  actual  fact  a  rise  in  the 
value  of  the  man's  redemption  ;  that  is  to  say,  indirectly,  and 
without  imposing  harmful  shackles  upon  the  productive 
process,  it  attains  the  same  result  which,  in  the  previous 
economic  regime,  was  attained  more  directly  and  brutally  by 
the  super  valuation  of  the  labourer. 

An  extremely  noteworthy  fact  (since  it  shows  that  at 
one  and  the  same  time  nature  poses  a  problem  and  provides 
the  means  for  its  solution)  is  that  such  a  method  of  indirect 
supervaluation  first  becomes  possible  at  this  precise  instant 
in  economic  evolution,  and  would  not  have  been  reahsable 
before.  In  fact,  in  the  slave-owning  period,  in  which  cultiva- 
tion is  restricted  to  comparatively  fertile  lands,  differential 
rent  has  not  yet  made  its  appearance,  or,  if  at  aU,  only  to  a 
trifling  extent,  and  for  this  reason  no  cultivated  land  possesses 
a  sensible  value  independent  of  the  labour  or  capital  employed 
upon  it.  Hence,  in  such  conditions,  a  law  subordinating 
the  purchase  of  a  man  to  the  purchase  of  the  land  which 
he  cultivates  would  not  effect  any  notable  elevation  in  the 
price   of  redemption  of   the   slave,   since  the  value   of   the 


lOO  The  Economic  Synthesis 

land  which  he  cultivates  is  nil,  or  infinitesimal.  But  when, 
with  the  rise  of  serfdom,  it  is  necessary  to  cultivate  land  of 
inferior  quality,  and  when,  consequently,  there  appear  for  the 
first  time  notable  differences  in  the  fertihty  of  cultivated  lands,  ^ 
the  more  fertile  areas  acquire  a  specific  value  considerably 
higher  than  that  of  land  "p&r  se  ;  this  increases  to  a  sensible 
extent  the  purchasing  price  of  such  lands  ;  and  the  result  is 
that  the  obHgation  to  take  over  at  the  same  time  the  land 
and  the  man  who  cultivates  it,  now  involves  for  the  labourer  a 
notable  increase  in  the  price  of  his  redemption.  In  this  way 
the  decline  in  the  productivity  of  cultivated  land,  at  the  same 
time  that  it  renders  necessary  the  replacement  of  the  direct 
supervaluation  of  the  man  by  his  indirect  supervaluation,  this 
latter  being  effected  by  the  association  of  the  value  of  the  man 
with  the  value  of  the  land — creates  the  very  possibifity  of  the 
said  association,  because  this  decline  now  for  the  first  time 
assigns  to  land  a  specific  and  considerable  value. 

It  may  however  happen,  and  usually  does  happen  during 
periods  of  decMne,  that  the  normal  value  of  the  man,  however 
much  increased  by  the  addition  of  the  normal  value  of  the  land 
which  he  cultivates,  becomes  inferior  to  the  maximum  ac- 
cumulated savings  of  the  labourer,  and  in  such  cases  the 
persistence  of  differentiated  income  is  once  more  compromised. 
In  order  to  guard  against  this  eventuality  it  is  therefore 
necessary  to  have  recourse  to  the  usual  complementary  method 
of  reducing  the  remuneration  of  the  worker.  In  this  economic 
phase,  such  reductions  are  not  practised  by  the  violent  methods 
proper  to  the  previous  age,  but  more  roundabout  and  less 
forcible  means  are  employed  :  it  may  be  through  private  or 
public  regulations  which  raise  the  labourer's  quit -rent  ;  it 
may  be  by  increasing  the  taxes  and  feudal  dues  that  press  upon 
him  ;  it  may  be  by  exacting  donations  and  benevolences. 
In  this  way  it  happens  that  the  persistence  of  differentiated 
income  is  secured  by  the  two  fundamental  methods  of  raising 
V,  and  lowering  R,  the  former  method  being  the  usual  one  in 
periods  of  expansion,  while  the  latter  preponderates  in  periods 
of  decHne  or  retrogression. 

*  "  Serf-land  {manaua  servilis)  pays  a  quit-rent  which  varies  according  to  the 
quality  of  the  land.  Even  the  faculty  given  to  the  serf  to  accumulate  a  peculium 
depends  on  several  circumstances,  the  chief  of  which  is  the  quality  of  his 


The  Forms  of  InWrde  roi 

This  theoretical  result  is  evidenced  with  admirable  pre- 
cision by  all  the  best -known  facts.  In  America,  as  soon  as  the 
supervaluation  of  the  slave  attains  harmful  proportions,  and 
towards  the  close  of  the  Roman  economy,  many  slave-owners, 
to  escape  the  injury  inflicted  upon  the  working  of  their  estates 
by  the  abnormally  high  value  of  the  slaves,  demand  free  tenant- 
farmers  for  their  lands.  ^  In  Europe,  from  the  ninth  century  a.d. 
onwards,  these  relationships,  hitherto  uncontrolled,  are 
regulated  by  law  ;  whilst  the  cultivators  of  the  soil  are  allowed 
full  ownership  of  their  peculium,  the  law  forbids  them  to  leave 
the  land  which  they  cultivate  and  prohibits  the  sale  of  them 
apart  from  the  land.^  The  same  applies  to  Russia  up  till 
the  sixteenth  centurj^^  and  in  the  West  Indies  after  the 
abohtion  of  slavery.*  Everywhere  the  sale  of  men  is  nothing 
more  than  the  sale  of  the  lands  which  these  men  cultivate  and 
of  the  services  which  they  must  provide.^  Not  only  is  it 
forbidden  to  sell  the  peasant,  but  even  to  enfranchise  him, 
apart  from  the  land  which  he  cultivates  ;  you  may  dimittere 
colonos  cum  terra,  but  not  sine  terra.^  Now,  since  the  peculium 
of  the  serf  is  usually  much  inferior  to  the  total  value  of  the 
man  and  of  the  land  which  he  cultivates,  the  practical  effect  of 
all  such  regulations  is  to  prohibit  the  redemption  of  the  serfs. 
Those  who  wish  to  make  use  of  their  peculium  to  redeem  them- 
selves without  the  land,  hardly  succeed  in  attaining  to  a 
virtual  or  ineffective  freedom,  for  they  remain  always  bound 
to  their  lord's  land.^    Thus,  in  England,  the  personal  manu- 

land  "  (Wergeland,  Slavery  during  the  Middle  Ages,  "  Journal  of  Political 
Economy,"  1902,  pp.  230,  et  seq.) — In  the  Flemish  cities  during  the  Middle 
Ages,  the  rents  paid  for  agricultural  lands  and  for  urban  lands  varied  accord- 
ing to  their  fertility  and  their  distance  (Des  Marets,  ^ttide  sur  la  propriete 
fonciere  dans  les  villes  du  moyen  dge,  Paris,  1898,  pp.  307,  329,  et  acq.). 

^  Cf.  Seek,  Die  Pachtleistungen  eines  romischen  Guies  iyi  Afrika,  "  Zeitschrift 
fiir  Sozialgeschichte,"  1898,  pp.  333,  et  seq. ;  together  with  Philipps  {loc.  cit.). 
Seek  quotes  an  apposite  example  from  the  period  93  to  96  a.d. 

*  Leicht,  Studi  sulla  proprietd  fondiaria  nel  medio  evo,  Padua,  1903  ;  Segre, 
Sulla  originine  e  sullo  sviluppo  storico  del  colonato  romano,  "Archivio  Giuridico," 
1891  ;   Rodbertus,  Geschichte  der  agrarischen  Entwickelung  Roms,  etc. 

3  Nowitzld  [History  of  the  Agricultural  Classes  in  Souih- Western  Russia 
from  the  Fifteenth  to  the  Eighteenth  Century],  Kiew,  1876,  p.  64. 

*  Loria,  Analisi,  II,  p.  125. 

^  Delisle,  ItJtudes  .sur  la  condition  de  la  classe  agricole  au  moyen  dge,  Evreux, 
1851,  p.  23. 

*  Savigny,  Vermischte  Schriften,  Berlin,  1850,  II,  pp.  40,  et  seq. 

'  Lamprecht,  Deutsches  Wirtschaftsleben  im  Mittelalter,  Leipzig,  1886, 
p.  1102 ;  Id.,  Deutsche  Geschichte,  2rid  edition,  Berlin,  1894,  V,  I,  p.  84,  ct  paeaim. 


i6'2  The  Economic  Synthesis 

mission  of  the  serf  did  not  bring  about  any  substantial  change 
in  his  lot,  for  he  passed  from  the  condition  of  serfdom  to  that 
of  villeinage,  wherein  he  was  still  always  forbidden  to  abandon 
the  soil.^  In  the  same  way,  the  aldio  of  Lombardy  and  the 
frjalsgrafi  of  Norway  are  serfs  who  have  redeemed  themselves, 
but  who  have  no  means  of  redeeming  the  land  on  which  they 
are  settled,  to  which  therefore  they  remain  bound.  They 
cannot  become  free  until  the  fifth  generation,  nor  be  admitted 
into  a  free  family  until  the  eighth  generation.  Nor  does 
enfranchisement  effected  by  charter  do  more  than  create  semi- 
freemen,  stiU  bound  to  the  soil.^  Conversely,  if  the  serf 
redeems  the  land,  but  not  himself,  he  ceases  to  be  bound  to 
the  soil,  but  remains  always  bound  to  the  lord  to  whom  he 
owes  the  feudal  dues  ;  he  is  no  longer  a  martens,  or  a  colonuSy 
but  a  fidelis.^ 

During  periods  of  dechne  in  this  form  of  income,  however, 
leading,  on  the  one  hand,  to  a  fall  in  the  value  of  the  land  and 
of  the  man  who  cultivates  it,  and  on  the  other  hand  to  an 
increase  in  the  accumulated  peculium  of  the  labourer,  his 
redemption,  together  with  the  land,  which  he  has  hitherto 
found  it  impossible  to  effect,  now  becomes  more  and  more 
practicable.  Further,  the  legal  inseparabiUty  of  the  man  from 
the  land,  which  is  rigidly  decreed  during  the  ascendent  period  of 
serfdom,  becomes  less  strict  during  the  declining  phase  of  that 
institution,  in  which  the  sale  or  enfranchisement  of  the  serf 
apart  from  the  land  which  he  cultivates  becomes  continually 
more  permissible.*  For  this  reason,  the  positive  method  of  in- 
hibiting access  to  the  land  by  elevating  the  value  of  such  access, 
becomes  less  and  less  practicable.  Income  thereupon  makes 
zealous  use  of  the  negative  method  of  reducing  the  pecuHum 
of  the  labourer.  Whereas  during  the  first  centuries  of  the 
serf-economy  the  condition  of  the  producer  was  relatively 
prosperous  and  easy,  the  last  and  more  disturbed  period  of 
that  economic  order  is  characterised  by  a  terrible  degradation 

1  Vinogradoff,  Growth  of  the  Manor,  p.  335.  Similarly  in  France,  Voltaire, 
Essai  sur  les  moeurs  (1829,  p.  439). 

*  Wergeland,  loc.  cit. 

3  Palmieri,  Sul  riscatto  dei  servi  net  Bologneae,  "  Archivio  Giuridico," 
November-December,  1906. 

*  Lamprecht,  Deutsches  Wirtschaftsleben,  p.  1230 ;  D'Avenel,  Hialoire 
de  la  propriite.  III,  pp.  164-70  ;  Vinogradoff,  loc.  cit.,  p.  44. 


The  Forms  of  Income  103 

in  the  condition  of  the  labourer.  In  Germany,  during  the 
thirteenth  century,  when  the  sale  of  serfs  apart  from  the  land 
first  became  permissible,  upon  the  peasantry  of  that  country 
fell  the  weight  of  the  extraordinary  taxes  of  the  sovereign,  as 
well  as  that  of  the  corvee,  or  baronial  dues.  The  consent  of 
authority  for  the  marriage  of  the  serfs,  hitherto  granted  with- 
out fee,  had  now  to  be  paid  for  in  hard  cash.  All  these  exactions 
from  the  peasants  continue  to  increase  throughout  the  four- 
teenth century  and  even  until  the  close  of  the  Hussite  War 
(fifteenth  century),  to  end  by  provoking  the  tremendous 
reaction  which  finds  an  explosive  outlet  in  the  Peasants' 
War.i  A  similar  course  of  events  may  be  traced  in  France, 
where  the  condition  of  the  serfs  becomes  much  worse  during 
the  latter  half  of  the  Middle  Ages^ ;  in  Italy,  where  the  con- 
dition of  the  peasantry  also  becomes  sensibly  worse  from  the 
thirteenth  to  the  fifteenth  century^  ;  and  in  Russia,  where 
the  serfs,  whose  burdens  are  at  first  comparatively  sHght, 
become  subject  during  the  middle  of  the  sixteenth  century  to 
a  corvee  of  356  days  of  forced  labour,  and  upon  whom  in  the 
eighteenth  century  is  imposed  the  terribly  harsh  system  of 
collective  responsibihty  for  feudal  dues  in  arrear.*  This 
reduction  in  the  pecuUum  of  the  serf  renders  it  impossible  for 
him  to  redeem  himself,  with  or  without  the  land :  hence  we 
find  in  France  in  the  year  1298  that  the  serfs  refuse  the 
grant  of  their  liberty,  because  it  is  offered  at  a  price  which 
exceeds  their  savings. 

But  with  the  progress  of  the  serf-economy,  the  barrier  which 
excludes  the  labourer  from  access  to  the  land  becomes  con- 
tinually sHghter  and  less  resistent.     On  the  one  hand,   the 

^  With  reference  to  the  progressive  worsening  of  the  lot  of  the  serfs  to- 
wards the  close  of  the  Middle  Ages,  see  Maurer,  Frohnhofer,  IV,  pp.  499-510, 
622-3 ;  Inama,  Deutsche  Wirtschaftsgeschichte,  III,  pp.  420-1  ;  Grimm, 
Dtutsche  Rechtsalterthilmer,  Gottingen,  1854,  pp.  394-5;  Langethal,  Oeachichte 
der  teiUschen  Landwirtschaft,  Jena,  1854-6,  III,  pp.  27,  et  aeq.;  Lamprecht, 
Deutsche  Geschichte,  V,  1,  pp.  79,  e^  seq.;  Nitzch,  Geschichte  des  deiUschen 
VolkeSf  Leipzig,  1883,  III,  pp.  359,  et  seq.;  Loria,  Analisi,  II,  pp.  182,  etseq. 
On  the  other  side,  see  Nieboer,  loc.  cit.,  pp.  384,  et  seq. 

^  Dom  Calmet,  Preuves  de  Vhistoire  de  Lorraine^  Nancy,  1748,  II,  cvi.  ; 
Jaures,  Histoire  Socialiste,  Paris,  xindated,  1303. 

^  Kovalewski  [The  Economic  Development  of  Europe  until  the  Rise  of  the 
Capitalist  Economy],  Moscow,  189&-1900,  II,  pp.  466,  et  seq.;  Pohlmann,  Die 
Wirtschaftspolitik  der  italienischen  Renaissance,  Leipzig,  1878 ;  Mondolfo, 
Terre  e  classi  in  Sardegna  nel  periodo  feudale,  Tiirin,  1903,  p.  76. 

*  Nowitzki,  loc.  cit. 


I04  The  Economic  Synthesis 

inseparability  of  the  labourer  from  the  land,  which  forbids 
variation,  in  accordance  with  special  technical  needs,  in  the 
number  of  the  labourers  employed  upon  any  given  area  of  soil, 
deprives  the  economic  enterprise  of  all  elasticity  ;  this,  by 
diminishing  the  income,  continually  increases  the  number  of 
the  recipients  of  income  who  are  forced  to  sell  their  under- 
takings, or  to  offer  for  sale  the  serfs  and  the  lands  which  these 
cultivate.  On  the  other  hand,  this  very  decHne  in  the  serf- 
economy  leads  to  a  diminution  in  the  number  of  those 
who  are  incHned  to  buy  the  enterprises  which  are  offered 
for  sale.  Hence,  since  the  supply  of  serfs  and  of  land 
offered  for  sale  increases,  while  the  demand  for  these  things 
diminishes,  there  follows  a  progressive  decUne  in  the  value  of 
the  serfs  and  of  the  land  to  which  they  are  bound  ;  until  at 
length  the  moment  arrives  in  which  the  value  of  the  serf 
superadded  to  that  of  the  land  which  he  cultivates,  falls  below 
that  of  his  pecuHum,  however  much  diminished  the  latter  may 
be  b}^  seigniorial  exactions,  and  it  now  becomes  possible  for  the 
serf  to  purchase  his  freedom. 

When,  in  such  conditions  the  legal  indissolubiMty  of  the 
labourer  from  the  soil  persists,  the  attempt  is  made  to  juggle 
with  the  price  of  redemption  by  raising  the  cost  of  the  land, 
80  that  the  serf  remains  indebted  to  the  landowner.  This  form 
is  met  with  in  its  clearest  development  in  Grermany  and  in 
Russia.  More  often,  however,  the  law  which  binds  the  labourer 
to  the  land  does  not  survive  this  period  of  crisis,  and  is  de- 
cisively annulled.^  Where  this  happens,  the  attempt  is  made 
to  impose  upon  the  serfs  a  price  of  redemption  which  totally 
deprives  them  of  all  pecuHum,  as  occurs,  for  example  in 
England  and  in  Itaty,  or  even  to  a  worse  extent  in  France, 
where  this  eventuates  in  despoiling  the  redeemed  serfs  of  all  their 
possessions. 2  However  this  may  be,  if  the  serf  has  redeemed 
himself  by  the  sacrifice  of  the  whole  of  his  pecuHum,  or  if  he 
has  redeemed  himself  together  with  the  land  by  contracting 

^  Thus,  in  Russia,  the  law  of  June  18th,  1840,  permits  the  landowners  to 
redeem  their  labourers  apart  from  the  land  to  which  they  are  bound  ;  and  in 
more  than  forty-two  possessional  factories  (employing  serfs  assigned  to  the 
industry  by  governmental  decree)  the  labourers  were  thus  effectively  redeemed 
becaxise  serf -labour  had  proved  unproductive  (Tugan-Baranowski  [The 
Russian  Factory  in  the  Present  and  the  Past],  Petersburg,  1898,  I,  pp.  151-4). 

2  Vinogradoff,  loc.  cit.,  p.  87  ;  Walker  Page,  The  End  of  Villainage  in 
England,  New  York,  1900,  p.  41  ;  D'Avenel,  loc.  cit. 


The  Forms  of  Income  105 

a  debt  to  the  landowner,  in  either  case  there  results  his  trans- 
formation from  the  condition  of  a  serf  possessed  of  a  peculium, 
and  for  practical  purposes  possessed  also  of  land,  into  that  of 
a  proletarian  dispossessed  alike  of  personal  and  of  real  property, 
and  compelled  henceforward  to  sell  his  working  powers  to 
capital  for  whatever  remuneration  he  can  obtain  ;  there  is 
thus  created  the  human  material  upon  which  at  length  can  be 
erected  the  superior  and  modern  form  of  differentiated  income. 
From  this  time  onwards,  all  the  land  capable  of  being  suc- 
cessfully worked  by  pure  labour  now  being  occupied,  the  only 
workers  who  can  estabhsh  themselves  on  their  own  account 
upon  the  land  are  those  who  possess  the  capital  requisite  for 
its  cultivation.  In  such  conditions,  therefore,  the  productive 
element  which  gives  the  worker  access  to  the  land  is  constituted 
by  those  still  unoccupied  areas  of  land  incapable  of  being 
worked  by  pure  labour,  the  value  of  these  being  equivalent  to 
the  capital  needed  for  their  cultivation.  In  other  words,  V, 
or  the  value  of  access  to  the  land,  is,  in  such  conditions,  con- 
stituted by  the  capital  requisite  for  the  working  of  unoccupied 
land  ;  hence  the  equation  V=R+x  can  be  realised  only  by 
arranging  that  the  capital  necessary  to  bring  under  cultivation 
that  area  of  available  land  which  is  cultivable  by  a  single  man, 
shall  exceed  the  accumulated  savings  of  the  labourer.  To 
attain  this  end  (where  the  conditions  in  question  do  not  arise 
spontaneously),  the  owners  set  themselves  in  the  first  place  to 
occupy  as  much  land  as  possible,  thus  pushing  back  cultivation 
to  less  productive  areas,  which  consequently  require  a  larger 
capital  to  work  them.  If  this  method  does  not  suffice,  they 
have  recourse,  as  usual,  to  the  complementary  method  of 
reducing  the  savings  of  the  labourer  by  means  of  the  syste- 
matic reduction  of  his  remuneration.  In  this  connexion,  an 
important  difference  must  be  indicated  between  this  form  of 
differentiated  income  and  the  others.  Whereas  in  the  case  of 
the  other  forms,  the  fundamental  method  of  insuring  the 
persistence  of  income  is  to  raise  the  value  of  access  to  the  land, 
and  the  other  method,  that  of  reduction  of  subsistence,  is 
employed  only  by  waj^  of  supplement  and  in  periods  of  crisis — 
in  this  form  of  income,  on  the  other  hand,  the  elevation  of  the 
value  of  access  to  the  land,  or  the  appropriation  of  the  land 
upon  which   that   elevation  depends,   are   not   permanently 


io6  The  Economic  Synthesis 

possible  to  the  requisite  degree,  and  for  this  reason,  the  first 
place  must  be  given  to  the  other  method  of  exclusion,  namely, 
to  the  reduction  of  wages. — However  this  may  be,  in  this,  as 
in  the  other  forms  of  differentiated  income,  the  twofold  process 
here  indicated  is  automatic  in  its  working.  For,  as  soon  as  the 
capital  requisite  for  the  cultivation  of  the  unoccupied  areas  of 
land  is  inferior  to  the  accumulated  savings  of  the  labourer,  a 
certain  sum  of  capital  is  left  without  income.  Now,  a  portion  of 
this  capital  will  devote  itself  to  production,  and  will  thus  claim 
the  occupation  of  the  land,  pushing  back  the  margin  of  cultiva- 
tion, and  increasing  the  capital  requisite  for  the  cultivation 
of  unoccupied  areas  ;  while  the  remainder  will  stagnate  as 
unproductive  capital,  thus  diminishing  the  rate  of  profit,  and 
diminishing  therefore  productive  accumulation  and  wages. 

Such  are  the  two  fundamental  methods  which  arise  and 
have  free  play  in  the  first  phase  of  the  economy  of  the  wage- 
system.  On  the  one  hand,  there  occurs  the  systematic  occupa- 
tion of  a  great  part  of  the  available  land  incapable  of  being 
successfully  worked  by  pure  labour,  thus  pushing  back  the 
margin  of  cultivation  and  increasing  the  amount  of  capital 
requisite  to  bring  land  under  cultivation  ;  on  the  other  hand, 
there  is  effected  the  vigorous  and  systematic  reduction  of 
wages,  through  the  depreciation  of  the  circulating  medium, 
through  the  use  of  technical  or  unproductive  capital,  etc. 

When  the  continued  increase  of  population  has  at  length 
led  to  the  full  occupation  of  the  land,  the  productive  element 
which  gives  access  to  the  land  consists  of  the  occupied  land 
which  is  offered  for  sale.  Hence,  in  such  conditions,  V,  or  the 
value  of  access  to  the  land,  is  constituted  (leaving  out  of 
consideration  the  capital  of  cultivation)  by  the  value  of  the 
lands  offered  for  sale,  and  this  is  in  its  turn  equivalent  to  the 
capitahsed  rent  of  these.  Hence  the  equation  V=R+x  can 
only  be  realised  by  arranging  that  the  value  of  the  land  shall 
exceed  the  labourer's  accumulated  savings,  whatever  the 
amount  of  these  may  be.  This,  once  more  (where  it  is  not  the 
spontaneous  outcome  of  the  social  conditions),  can  be  effected, 
either  by  artificially  diminishing  the  subsistences  of  the  labourer, 
or  by  artificially  raising  the  value  of  the  land.  As  always,  the 
first  method  is  in  operation  during  periods  of  social  decHne, 
while  conversely  the  second  method  is  in  operation  during  the 


The  Forms  of  Income  107 

ascendent  periods  of  the  economy.  It  is  the  latter  method,  in 
fact,  which  at  the  present  day  displays  itself  in  an  endemic 
or  chronic  form  in  all  the  countries  of  the  old  world,  whilst  from 
the  reports  of  consuls  and  commercial  agents  we  learn  that 
among  the  new  nations  of  the  antipodes  the  hke  manifesta- 
tions are  acute  and  increasing. 

Thus,  to  sum  up,  the  denial  of  free  land  which  is  the  founda- 
tion of  differentiated  income,  is  always  effected  by  means  of 
the  direct  appropriation  on  the  part  of  the  recipients  of  income 
of  the  productive  element  which  gives  access  to  the  land,  and 
by  an  elevation  of  the  value  of  this  element  to  a  figure  which 
exceeds  the  accumulated  savings  of  the  worker.  In  every  case 
the  persistence  of  differentiated  income  demands  that  the 
value  of  access  to  the  land  should  always  maintain  itself  at  a 
level  exceeding  the  accumulated  savings  of  the  worker.  This 
is  effected,  either  by  raising  the  value  of  access  to  the  land,  or 
by  diminishing  the  subsistences  of  the  labourer.  Such  is  the 
fundamental  equation  of  differentiated  income — ^an  equation 
which  manifests  itself  in  various  forms  in  relation  with  the 
specific  varieties  of  this  income.  In  broad  outline,  we  may 
distinguish  two  principal  forms  of  differentiated  income.  In 
the  first  of  these,  the  productive  element  which  must  be 
monopolised  by  the  recipients  of  income,  and  which  must 
exceed  in  value  the  savings  of  the  worker,  is  man  ;  in  the  second 
form,  it  is  the  land.  The  first  of  these  forms  may  again  be 
subdivided  into  two,  in  one  of  which  (slavery)  the  excess  of 
value  of  the  productive  element,  man,  is  directly  produced 
(super valuation  of  the  man),  while  in  the  other  form  (serfdom) 
it  is  indirectly  produced  (forced  association  of  the  purchase  of 
the  man  with  the  purchase  of  the  land).  The  second  form  may 
also  be  subdivided  into  two,  in  the  first  of  which  (systematic 
wage-system)  the  productive  element  that  is  monopohsed  is 
the  land  capable  of  being  worked  by  pure  labour,  and  the  pro- 
ductive element  whose  value  must  exceed  the  worker's  savings 
is  the  land  not  capable  of  being  worked  by  pure  labour,  whose 
value  is  measured  by  the  capital  necessary  for  its  cultivation  ; 
whilst  in  the  second  form  (automatic  wage-system)  the  pro- 
ductive element  which  is  monopohsed,  whose  value  must 
exceed  the  worker's  savings,  is  the  land  offered  for  sale,  whose 
value  is  measured  by  capitafised  rent. — ^The  two  typical  forms 


io8  The  Economic  Synthesis 

of  differentiated  income  are  the  first  sub-species  of  the  first 
form  (slavery)  and  the  second  sub-species  of  the  second  form 
(automatic  wage-system),  for  in  both  of  these,  differentiated 
income  depends  upon  the  ownership  and  direct  super  valuation 
of  a  single  fundamental  element — ^the  man  or  the  land  ;  where- 
as in  the  two  other  forms,  the  super  valuation  is  either  indirect 
(serfdom)  or  has  reference  to  an  element  not  precisely  identical 
with  that  which  is  the  object  of  exclusive  ownership  (systematic 
wage-system). 

Such  is  the  comphcated  and  manifold  process  giving  rise  to 
differentiated  income,  or  to  the  division  of  the  population  into 
two  classes,  endowing  one  class  with  the  ownership  of  the  means 
of  production  and  with  income,  and  excluding  the  other  class 
from  both  of  these. — Now  the  labourers,  being  deprived  of  the 
means  of  production,  and  therefore  dependent,  are  unable  in 
any  case  to  associate  their  labour  on  their  own  initiative,  but 
must  yield  to  the  influence  of  an  external  constraint  ;  that  is 
to  say,  in  such  conditions  the  association  of  labour  is  neces- 
sarily coercive.  On  the  other  hand,  the  owners  of  the  means 
of  production  and  of  income,  being  endowed  by  the  very  fact 
of  ownership  with  an  economic  force  enormously  superior  to 
that  of  those  who  are  excluded  from  such  ownership,  can  con- 
trol and  discipline  these  latter  as  they  will ;  thus  the  coer- 
cion bringing  about  the  association  of  labour  assumes  a 
purely  individual  and  capitahst  character,  because  this  coer- 
cion is  effected  by  the  private  owners  under  the  stimulus  of 
their  egoism. — ^In  the  slave-economy,  the  coercion  to  the 
association  of  labour  is  effected  by  the  slave-owners  ;  in  the 
serf-economy,  it  is  effected  by  the  feudal  lords,  lay  or  ecclesias- 
tical (as  Chateaubriand  has  pointed  out,  the  monasteries 
themselves  were  substantially  nothing  more  than  institutions 
for  the  coercive  association  of  labour,  forcibly  combining  the 
working  powers  of  the  monks  under  the  rule  of  abbot  or  prior)  ; 
whilst  in  the  wage-economy,  the  workers  are  rigorously 
associated  under  the  dictatorial  rule  of  the  capitalist  or  manu- 
facturer. 

The  coercion  thus  exercised  b}^  the  owners  of  the  productive 
elements  ma}-  take  the  form  of  imposing  the  complex  associa- 
tion of  labour,  that  is,  of  assigning  to  different  labourers  the 
production  of  a  different  commodity  ;    but  in  every  case  it  en- 


The  Forms  of  Income  109 

forces  the  simple  association  of  labour,  that  is,  it  forcibly  dis- 
ciplines the  labour  of  the  coproducers  of  a  single  commodity. 
But  such  coercion  to  the  association  of  labour  presents  a 
dechning  degree  of  intensity  in  the  three  successive  forms  of 
differentiated  income,  proportional  to  the  correlative  decHne  in 
the  intensity  of  the  servitude  which  it  inflicts  upon  the 
labourer,  and  to  the  increasing  resistance  offered  by  the  latter 
to  any  brutal  compulsion. — ^The  coercion  to  the  association  of 
labour,  unspeakably  severe  in  the  case  of  the  slave  income, 
becomes  less  marked  in  the  case  of  the  serf  income  (where  the 
owner  is  a  kind  of  constitutional  sovereign,  exercising  a  miti- 
gated rule  over  the  association  of  producers),  and  becomes  still 
less  considerable  in  the  case  of  the  wage-system,  to  attain  its 
shghtest  limits  under  the  automatic  wage-system. 

The  fundamental  and  irremediable  separation  thus  effected 
between  the  labourers  and  the  recipients  of  income,  suppresses 
any  kind  of  competition  between  the  members  of  these  two 
classes,  that  is  to  say,  between  the  coerced  and  the  coercers, 
components  of  one  and  the  same  productive  association^ ;  and 
this  fundamental  barrier  to  competition,  the  element  of  mono- 
poly thus  insinuated  into  the  economic  process,  suffices  'ptr  se 
to  cancel  all  possibility  of  equivalence  between  the  value  of 
the  products  and  the  effective  quantity  of  labour  aggregated 
within  them.  But  in  the  two  first  forms  of  differentiated  in- 
come, to  the  absence  of  competition  among  the  components  of 
a  single  productive  association,  there  is  superadded  the  absence 
of  all  competition  among  the  different  productive  associations  ; 
for  the  ownership  of  men  characteristic  of  these  two  forms  of 
income  excludes  the  possibility  of  the  transference  of  the 
labourers  from  one  sphere  of  production  to  another.  The  non- 
existence of  competition  among  the  productive  associations 
has  as  its  result  that  the  value  of  the  products  diverges,  not 
only  from  the  quantity  of  labour  effectively  contained  in  these 

^  It  follows  from  this  that  nothing  can  be  more  erroneous  than  the  custom- 
ary assertion  that  the  wage-system  is  the  system  of  free  competition,  in  con- 
tradistinction to  all  previoiis  economic  forms,  which  were  dominated  by 
monopoly.  In  the  wage  economy,  in  fact,  there  is  lacking  the  fundamental 
competition  between  the  labourers  and  the  owners  of  the  means  of  produc- 
tion ;  so  that  the  truth  is  that  all  the  forms  of  differentiated  income  are  per- 
meated by  monopoly,  though  in  varying  degrees.  Apart  from  this  it  must  bo 
remembered  that  the  existence  or  non-existence  of  free  competition  is  in  any 
case  an  extremely  extrinsic  criterion,  so  that  it  cannot  serve  as  the  foundation 
of  a  rational  and  profound  classification  of  economic  forms. 


I  lo  The  Economic  Synthesis 

products,  but  in  addition  from  the  more  general  measure  of 
the  cost  of  production,  and  becomes  subject  to  the  less  precise 
and  more  elastic  rule  of  monopoly  value.  In  the  third  form 
of  differentiated  income,  on  the  other  hand,  based  upon  the 
appropriation  of  land,  while  there  is  an  absence  of  competition 
among  the  components  of  a  single  productive  association, 
there  is  persistent  competition  among  the  various  associa- 
tions ;  for  this  reason  the  value  of  the  products,  while  diverging 
from  the  measure  of  the  effective  labour,  is  normally  equiva- 
lent to  the  measure  of  the  cost  of  production. 

The  normal  inconvertibiHty  of  the  labourers  into  recipients 
of  income  which  is  thus  brought  about  gives  rise  to  a  funda- 
mental difference  between  the  economic  conditions  of  one  class 
and  of  the  other. — On  the  other  hand,  since  the  recipients  of 
income  are  able,  in  such  conditions,  to  make  their  means  of 
production  bear  fruit  through  others'  labour,  there  is  no  limit 
to  the  quantity  of  income  which  each  one  of  them  can  seek  to 
obtain,  and  hence  also  the  difference  between  the  individual 
incomes  is  subject  to  unlimited  increase.  Thus  it  comes  about 
that  the  economy  of  differentiated  income  presents  most  con- 
spicuous variations  in  income  ;  and,  in  correlation  with  this 
fact,  there  occur  extreme  variations  in  the  matter  of  con- 
sumption, which,  in  the  case  of  the  recipients  of  small  and 
medium  incomes  is  Hmited  to  the  more  modest  products,  while 
in  the  case  of  the  recipients  of  the  larger  incomes  consumption 
runs  up  the  scale  to  the  use  of  the  most  dainty  and  luxurious 
objects.  This  reacts  upon  the  distribution  of  the  work  of  pro- 
duction among  the  various  objects  of  consumption,  leading 
to  an  increase  in  the  production  of  useless  objects,  and  to  a 
corresponding  diminution  in  the  production  of  those  objects 
that  are  capable  of  providing  for  humanity  a  soHd  and  enduring 
well-being.  ^ 

From  all  these  considerations  it  becomes  apparent  that 
differentiated  income  presents  characteristics  absolutely  op- 
posed to  those  of  the  form  of  income  previously  considered. 
Whereas    undifferentiated     income     may    in    the    abstract 

1  "In  so  far  as  in  any  nation  effort  is  applied  to  the  improvement  of 
goods  for  the  wealthy,  to  the  same  extent  there  must  follow  a  worsening  of 
the  goods  for  the  poor,  for  it  is  not  possible  that  anyone  shall  consimae  goods 
of  a  better  quality,  without  others  having  to  consume  goods  of  a  worse 
quality  "  (Ortes,  Economia  nazionale,  Custodi  P.M.  XXII,  pp.  247,  et  passim). 


The  Forms  of  Income  in 

be  founded  either  upon  free  or  upon  coercive  association 
(although  hitherto  it  has  in  fact  always  been  founded  upon 
the  latter),  differentiated  income  is  always  and  necessarily 
founded  upon  coercive  association.  Moreover,  and  here 
we  have  a  difference  far  more  significant,  in  the  case 
of  differentiated  income,  the  coercion  to  the  association 
of  labour  presents  a  far  more  conspicuous  intensity  than 
in  the  case  of  undifferentiated  income  ;  for,  whereas  in 
the  case  of  the  latter  the  coercion  is  effected  in  the  per- 
sonal interest  of  the  labourers  who  are  coerced,  by  an 
instrument  which  emanates  from  themselves,  and  which 
cannot  derive  therefrom  any  egoistic  advantage,  where  differ- 
entiated income  is  concerned,  the  coercion  is  effected  alto- 
gether regardless  of  the  interest  of  the  labourers  who  are 
coerced,  and  in  the  egoistic  interest  of  the  coercers.  Hence, 
each  of  the  three  successive  forms  of  undifferentiated  in- 
come presents  a  coercion  less  intense  in  degree  than  the  corre- 
sponding and  contemporaneous  form  of  differentiated  income. 
That  is  to  say :  the  communistic  economy  exhibits  a  less  intense 
form  of  coercion  than  slavery  ;  the  corporative  economy,  a 
less  intense  form  than  serfdom  ;  the  co-operative  economy,  a 
less  intense  form  than  the  wage-system.  And  it  is  not  impos- 
sible that  a  form  of  undifferentiated  income  may  present  a  less 
intense  coercion  than  is  presented  by  a  form  of  differentiated 
income  belonging  to  a  subsequent  social  phase  :  for  example, 
the  corporative  economy  may  be  less  coercive  than  the 
wage-system,  etc.  Further,  whereas  undifferentiated  income 
founded  upon  coercive  association  regularly  excludes  com- 
petition among  the  coerced,  differentiated  income  may  sup- 
press such  competition,  but  necessarily  suppresses  competition 
between  coerced  and  coercers  ;  whereas  this  cannot  be  said 
of  the  former  (undifferentiated  income),  in  which  the  coercion  is 
not  exercised  by  private  individuals  standing  in  opposition 
to  the  coerced,  but  is  exercised  by  an  authority  which  emanates 
from  the  coerced  themselves.  Finally,  whilst  undifferentiated 
income  is  essentially  equaHsing  in  character,  differentiated 
income  brings  about  the  extremest  degrees  of  inequaUty, 
introducing  every  possible  kind  of  divergence  in  the  lot  and 
in  the  income  of  individuals. 

Now  between  these  two  forms  of  income  thus  categorically 


1 12  The  Economic  Synthesis 

opposed,  there  is  carried  on  a  struggle  without  quarter,  a 
struggle  which  ends  only  when  one  of  them  remains  victor  on 
the  field.  However,  if  one  of  the  two  forms  of  income  succeeds 
in  any  case  in  gaining  the  mastery  of  the  economic  order,  it 
need  not  therefore  succeed  in  effecting  the  total  suppression 
of  the  representatives  of  the  opposed  form,  which  may  survive 
more  or  less  miserably  beside  the  representatives  of  the 
victorious  form.  Thus,  instead  of  bringing  about  the  absolute 
domination  of  differentiated  income,  or  of  undifferentiated 
income,  as  the  case  may  be,  the  struggle  results  in  the 
preponderance  of  one  or  other  form  of  income,  while  con- 
fining the  defeated  form  to  a  surreptitious  and  sub- 
ordinate existence.  Thus,  in  the  medieval  city,  while  un- 
differentiated income  prevails  in  the  craft-guild,  differentiated 
income  nevertheless  persists  and  tries  its  strength  in  the 
turbid  manipulations  of  usury,  or  in  the  ventures  of  the  mer- 
cantile companies.  Conversely,  in  the  classical  economy,  in 
which  differentiated  income  flourishes  victoriously  in  the 
villae.  of  the  slave-owners,  differentiated  income  does  not 
wholly  pass  away,  non  omnis  moritur,  but  persists  in  rural  petty 
proprietorship  and  in  the  independent  craft.  Similarly,  the 
modern  economy,  essentially  based  upon  differentiated  income, 
none  the  less  presents  certain  modest  and  neglected  mani- 
festations of  undifferentiated  income  upon  the  foundation  of 
associated  Labour  (co-operative  enterprise),  or  of  isolated  labour 
(petty  proprietorship,  independent  craft manship). 

But  the  predominant  form  of  income,  if  it  does  not  succeed 
in  extirpating  the  rival  form  of  income  from  the  economic 
field,  yet  exercises  a  notable  influence  upon  the  manifestations 
of  this  subordinate  form,  for  these  manifestations  are  pos- 
sible only  within  the  orbit  of  the  dominant  form  of  income  and 
along  the  hnes  traced  thereby. — ^Thus,  in  an  epoch  in  which 
differentiated  income  has  secured  complete  predominance,  the 
sporadic  manifestations  of  undifferentiated  income  are  forced 
to  obey  the  rules  prescribed  by  differentiated  income.  Do  we 
not  see  every  day  that  co-operative  associations  are  constrained, 
in  order  to  Hve,  to  follow  methods  essentially  capitaHstic, 
raising  capital  at  interest,  and  employing  wage-earners  just 
like  the  purely  capitalist  enterprises  ?  Conversely,  in  an  epoch 
in    which    undifferentiated    income    prevails,    differentiated 


The  Forms  of  Income  1 13 

income,  when  this  makes  an  exceptional  appearance,  must  obey 
the  rules  formulated  by  the  prevalent  undifferentiated  income. 
Thus,  during  the  Middle  Ages,  the  capitalist  or  the  trader  must 
be  inscribed  as  members  of  a  guild,  and  are  not  entitled  to 
employ  wage-earners,  because  a  fundamental  obstacle  is  im- 
posed to  this  by  the  predominant  undifferentiated  income. 

Nor  is  this  all,  for  the  prevalent  form  of  income  exercises  in 
addition  a  decisive  influence  in  moulding  the  ideological  repre- 
sentation of  the  oppressed  and  inferior  form  of  income.  In 
fact,  in  every  historical  epoch,  the  whole  economic  order  is 
fashioned  with  sole  regard  to  the  dominant  form  of  income, 
which  alone  claims  universal  attention,  and  with  reference  to 
which  theoretical  conceptions  are  solely  directed,  as  also  the 
positive  regulations  of  the  civil  law.  The  result  of  this  is 
that  public  opinion  and  science  itself  are  loath  to  consider  the 
subordinate  form  of  income  as  something  different  from  and 
opposed  to  the  dominant  form,  and  are  accustomed  to  regard 
the  former  simply  as  a  variety  or  sub-species  of  the  latter,  or, 
in  other  words,  to  describe  the  atypical  income  in  the  terms 
of  the  typical  income. — ^Thus,  in  the  Middle  Ages,  the  economic 
relationships  most  foreign  to  the  feudal  organism,  namely 
monetary  relationships,  become  clothed  in  feudal  trappings  ; 
there  are  created  fiefs  en  Vair,  rights  to  quit-rents  having  no 
connexion  with  landed  property  ;  there  is  given  in  fief  the 
office  of  letter-carrier,  or  water,  or  wind,  or  faith  ;  nay  more, 
it  comes  at  last  to  be  affirmed  that  the  petty  proprietor  holds 
his  farm  in  fief.  In  the  medieval  city,  where  undifferentiated 
income  preponderates  in  the  guild,  this  gives  the  stamp  which 
is  forcibly  imposed  upon  the  most  heterogeneous  and  disparate 
phenomena,  and  there  is  thus  figured  under  the  aspect  of  a  guild, 
not  the  church  alone,  but  even  trade,  in  which,  however,  the 
corporative  element  disappears  to  give  place  to  the  most 
purely  individuahstic  developments  of  differentiated  income. — 
Conversely,  in  our  own  epoch,  in  which  differentiated  income 
predominates,  science  figures  all  economic  manifestations  as 
variations  of  this  form  of  income.  Thus,  not  a  few  econo- 
mists conceive  of  the  petty  proprietor  as  a  labourer-capitalist 
simultaneously  receiving   wages,   profit,   and  rent.^     Others 

*  John  Stuart  Mill,  Principles,  p.  282  ;  for  the  contrary  view,  8ee  Marx, 
Mehrwerththeorien,  II,  2,  pp.  130-31. 


1 14  The  Economic  Synthesis 

demonstrate  with  some  heat  that  the  co-operative  economy 
does  not  differ  substantially  from  the  capitaUst  economy,  and 
that  the  members  of  a  co-operative  society  are  merely  wage- 
earners  employed  by  that  society,  which  gives  them,  in  addition 
to  remuneration,  a  share  in  the  profits.^  Finally,  we  have  the 
economists  who  succeed  in  figuring  the  sociahst  state  of  the 
!  future  as  a  capitalist  Briareus,  who  advances  a  wage  to  the 
labourers  co-operating  under  his  discipline,  granting  them,  as 
.  might  any  individual  capitahst,  a  more  or  less  considerable 
f  share  in  the  profit.  ^ — Such  a  way  of  regarding  matters  is,  we 
need  hardly  say,  radically  vicious,  since  it  forcibly  ignores  the 
essential  opposition  between  the  two  forms  of  income,  and  in- 
volves a  glaring  falsification  of  life  and  of  reality.  Yet  it  is 
the  inevitable  corollary  of  the  social  empire  exercised  by  the 
prevalent  form  of  income,  and  of  the  power  therewith  associ- 
ated to  mould  the  economic  world  and  its  ideological  repre- 
sentation. 

§  4.  Mixed  Income 

Hitherto  we  have  seen  the  two  fundamental  forms  of  income, 
undifferentiated  and  differentiated,  able  to  exist  side  by  side  in 
the  social  organism,  but  themselves  giving  life  to  specific 
organisms  substantially  disparate.  There  are,  that  is  to  say, 
certain  undertakings  founded  upon  undifferentiated  income 
which  exist  within  a  single  social  aggregate  side  by  side  with 
other  undertakings  founded  upon  differentiated  income  ; 
but  in  each  particular  undertaking  the  income  is  either 
wholly  undifferentiated,  or  whoUy  differentiated.  Never- 
theless it  may  happen  that  within  a  single  undertaking, 
side  by  side  with  certain  labourers  who  have  income, 
there  are  non-labourers  who  have  income,  or  labourers 
who  do  not  have  income  ;  that  is  to  say,  within  a  single 
undertaking,  beside  undifferentiated  income  there  appears, 
either  differentiated  income,  or  subsistence  divorced  from 
income. — ^Now,  in  all  such  cases  we  have  mixed  income.  This 
may,  in  its  turn,  give  rise  to  two  sub-forms,  according  as 

1  Leroy-Beaulieu,  Traite  d'dcon.  pol.  II,  pp.  238,  et  seq.;  Spencer,  Principles 
of  Sociology,  III,  London,  1896,  pp.  560,  et  seq.;  Pantaleoni,  Esame  critico  dei 
principt  teorici  della  cooperazione,  "  Giomale  Economisti,"  1898. — Cf.  Marx, 
Kapital^llI,  II,  pp.  412-3. 

2  See,  for  instance,  Offermann,  Das  fictives  Kapiial,  Vienna,  1896, 
pp.   177-8. 


The  Forms  of  Incmne  1 15 

the  labourers  sharing  in  the  income,  share  or  do  not  share  in 
the  ownership  of  the  means  of  production. — ^In  the  first  case, 
mixed  income  manifests  itself  in  a  series  of  composite  economic 
forms,  which  may  be  classed  in  two  fundamental  groups. — 
In  fact,  in  this  connexion,  two  eventuahties  are  possible  : 
either  that  the  totality  of  the  means  of  production  is  owned 
by  one  portion  of  the  workers,  or  that  one  portion  of  the  means 
of  production  is  owned  by  the  totahty  of  the  labourers.  The 
former  type  manifests  itself  in  the  workshops  employing  paid 
labourers.  Thus,  if  a  capitalist-labourer  (such  as  a  master- 
craftsman  during  the  declining  period  of  the  guild-system,  or 
such  as  a  comparatively  well-to-do  independent  artisan  in  our 
own  day)  possesses  sufficient  capital  to  employ  a  certain  number 
of  wage-earners,  but  continues  to  contribute  his  own  labour  to 
the  undertaking — side  by  side  with  the  labourer  who  has  in- 
come (the  master-craftsman,  or  the  independent  artisan),  there 
are  the  labourers  without  income  (the  wage-earners)  ;  hence, 
one  portion  of  the  subsistence  is  personally  connected  with 
income,  while  the  other  portion  is  divorced  therefrom. — ^We 
have,  therefore,  to  do  here  with  mixed  income. — The  second 
type  manifests  itself  in  home-industry  under  capitalist  condi- 
tions, in  which  the  capital  is  partly  advanced  by  the  capitaUst 
and  partly  by  the  labourer  ;  also  in  the  case  of  working 
tenant-farmers,  and  small  holders  ;  in  collective  ownership 
and  in  the  craft-guild  during  the  period  of  their  decline,  when 
they  have  become  permeated  by  inequaHty  and  privilege  ;  and, 
finally,  in  the  spurious  co-operatives  of  our  own  times,  in  which 
the  associated  labourers  own  as  a  rule  but  a  small  fraction 
of  the  social  capital  and  receive  but  a  proportionately  small 
share  of  the  income.  In  all  these  economic  forms,  the  labourer 
receives  in  addition  to  subsistence  a  share  of  income,  most  of 
which,  however,  accrues  to  the  non-labourers  ;  that  is  to  say, 
in  such  conditions,  the  income  is  mixed. 

When,  on  the  other  hand,  the  labourer  who  participates  in 
income  has  no  share  whatever  in  the  ownership  of  the  means 
of  production,  the  mixed  income  does  not  give  rise  to  any 
specific  economic  forms,  but  grafts  itself  upon  differenti- 
ated income,  without  in  any  degree  altering  the  external 
characteristics  of  that  income.  This  happens  whenever  the 
remuneration  of   the  labourer    rises  above  the   subsistence 


1 1 6  The  Economic  Synthesis 

evel,  whether  in  the  form  of  profit  sharing,  or  in  that  of  bonus, 
or  simply  through  a  rise  in  wages  above  a  certain  rate  ;  for 
any  such  excess,  involving  as  it  does  that  the  worker  receives 
a  share  of  income,  effectively  transforms  differentiated  income 
into  mixed  income,  without  however  leading  to  any  definite 
modification  in  the  external  configuration  of  the  income.^ 

The  case  just  examined  shows  us  that  the  form  of  income 
does  not  necessarily  and  per  se  reveal  the  substance  ;  for  here 
we  see  an  income  which  does  not  differ  formally  from  differ- 
entiated income,  and  yet  differs  from  it  substantially,  or  is  in 
fact  a  mixed  income. — But  the  incapacity  of  the  form  of  the 
income  to  reveal  its  substance  is  no  less  apparent  in  the  case 
previously  examined  in  which  the  labourer  shares  in  the  owner- 
ship of  the  means  of  production.  In  fact,  these  composite 
economic  forms,  constituting  the  mould  within  which  mixed 
income  makes  its  appearance  in  these  particular  manifesta- 
tions, may  always  conceal  the  presence  of  differentiated  in- 
come. Thus,  for  example,  the  small  farm  is  certainly  a  form 
of  mixed  income  when  the  tenant-farmer  obtains  anything 
more  than  subsistence.  But  when,  on  the  other  hand,  as  in 
Ireland  and  in  Russia,  the  working  tenant-farmer  hardly 
succeeds  in  procuring  a  bare  subsistence,  and  indeed  often  does 
not  succeed  in  doing  this,  so  that  he  is  obliged  to  work  as  a 
day-labourer  for  neighbouring  owners,  ^  we  are  substantially 
in  face  of  a  form,  however  deceptive  and  insidious,  of  differ- 
entiated income,  in  which  the  whole  of  the  income  is  received 
by  non-labourers. — The  same  may  be  said  of  the  modern  craft, 
which  often  fails  to  provide  the  craftsman  with  more  than  a 
bare  subsistence,  whilst  the  whole  of  the  income  is  secured  by 
those  who  advance  capital  and  land  ;  the  same  may  also  be 
said  of  most  modern  co-operatives,  whose  associates  are  effec- 
tively reduced  to  the  most  wretched  wages. — Thus,  whereas 
in  the  former  case,  that  of  a  wage  in  excess  of  a  bare  subsist- 
ence, we  have  mixed  income  masquerading  as  differentiated 
income,  in  this  case  we  have  differentiated  income  masquer- 
ading as  mixed  income. — ^To  put  the  matter  in  more  general 

^  Ricardo  {loc.  cit.,  pp.  210,  256),  when  he  says  that  the  net  income  is  equal 
to  the  product  minus  the  necessary  subsistences,  implies  that  any  excess  of 
wages  over  subsistence  constitutes  income  in  the  strict  sense  of  the  term. 

*  Bonn,  Archiv  fiir  soziale  Oesetzgehung,  1904,  pp.  166,  et  seq.  [Russian 
National  Economy}^  August,  1904,  p.  3. 


The  Forms  of  Income  117 

terms  :  the  essence  of  mixed  income  is  the  participation  of 
the  worker  in  income,  which  may  or  may  not  be  accompanied 
by  his  participation  in  the  ownership  of  the  means  of  produc- 
tion. If  the  former  Idnd  of  participation  is  not  accompanied 
by  the  latter,  the  income  preserves  the  form  of  differentiated 
income,  but  is  in  reaUty  mixed  income  ;  whereas,  if  there  is 
participation  of  the  second  kind,  but  not  of  the  first,  the  income 
assumes  the  form  of  mixed  income,  but  is  in  reality  differ- 
entiated income. 

In  contradistinction  from  undifferentiated  and  differentiated 
income,  which  are  fundamental  economic  forms,  occupying  in 
turn  almost  the  whole  of  the  economic  field,  mixed  income  is  a 
subsidiary  form  of  income,  occupying  merely  a  secondary  place 
in  that  field. — Now,  just  as,  given  the  social  coexistence  of 
the  two  fundamental  forms  of  income,  the  subordinate  form  is 
constrained  to  develop  within  the  appointed  orbit  of  the  domi- 
nant form  ;  so  also,  given  the  social  coexistence  of  mixed  in- 
come with  the  two  pure  forms  of  income,  the  first-named  is 
constrained  to  subordinate  its  own  development  to  the  rules 
prescribed  by  that  pure  form  of  income  which  is  at  the 
time  predominant.  Thus,  the  workshop  employing  paid 
workers,  if  it  develops  within  the  capitalist  economy,  exhibits 
essentially  capitalist  characteristics  ;  whereas,  if  it  makes  its 
appearance  within  the  corporative  economy,  its  characteristics 
are  corporative. 

Nor  is  this  all.  Of  the  two  pure  forms  of  income  coexisting 
with  mixed  income,  that  which  in  the  period  under  considera- 
tion is  subordinate  cannot  develop  unless  in  subjection  to  the 
rules  and  to  the  shackles  imposed  by  the  dominant  form.  Thus, 
if  the  normal  form  of  income  is  differentiated  income,  the  un- 
differentiated income  which  is  intermingled  with  mixed  income 
is  strictly  Hmited  ahke  in  its  quantity  and  in  its  development 
by  the  fundamental  conditions  of  existence  of  the  differentiated 
income.  We  already  know  that  the  fundamental  rule  of 
differentiated  income  is,  that  the  savings  of  the  labourer  must 
be  less,  by  however  little,  than  the  value  of  access  to  the  land. 
If,  then,  the  predominant  form  of  income  is  differentiated, 
the  undifferentiated  income  intermingled  with  mixed  income 
must  be  such  that  the  maximum  saving  it  renders  possible  shall 
be  inferior,  by  however  little,  to  the  value  of  access  to  the  land. 


1 18  The  Economic  Synthesis 

If  the  maximum  saving  R  is  equal  to  n  times  the  undiffer- 
entiated income  r,  so  that  R=7ir,  it  is  necessary  that  the  value 

of  access  to  the  land,  V,  be  equal  to  wr+x,  or  that  r=^^—:s.. 

This  is  the  maximum  limit  of  undifferentiated  income  in  this 
form  of  mixed  income.  Now,  given  this  limitation,  the  owner 
of  undifferentiated  income  cannot  employ  his  savings  in  order 
to  found  an  economy  of  undifferentiated  income  ;  for  his  income 
is  insufficient  to  provide  access  to  the  land,  and  he  must  employ 
his  savings  within  the  circle  of  differentiated  income,  within 
the  limits,  that  is  to  say,  of  the  predominant  social  form. 
Thus,  the  slave,  the  serf,  and  the  wage-earner  cannot  make 
use  of  their  pecuhum  in  order  to  found  independent  under- 
takings, because  this  does  not  suffice  to  purchase  freedom,  or  to 
purchase  the  land,  but  the}^  must  use  it  in  the  employment  of 
slaves  (as  in  the  case  of  the  servus  vicarius)  or  of  wage-earners 
(as  in  the  sub-contract  [sweating']  system  and  the  apprenticeship 
of  our  own  times),  or  else  in  undertakings  pecuniarily  dependent 
upon  the  owners  of  the  differentiated  income  ;  thus  in  every 
case  the  employment  of  the  undifferentiated  income  which 
forms  a  part  of  mixed  income  is  effected  within  the  circle  and 
according  to  the  modahty  of  the  predominant  differentiated 
income.  1  Conversely,  if  the  predominant  form  of  income  is 
undifferentiated,  the  differentiated  income  which  forms  a  part 
of  mixed  income  can  be  employed  only  in  subjection  to  the 
rules  imposed  by  the  predominant  undifferentiated  income. 
Thus, in  the  Middle  Ages,  the  master-craftsmen  or  the  capitalists 

*  These  phenomena  are  seen  with  especial  distinctness  in  the  slave-holding 
regime.  Thus,  in  Babylon,  until  800  B.C.,  and  in  classical  Rome,  the  slave 
can  buy  or  hire  other  slaves,  or  may  contract  at  his  own  risk  (without  any 
responsibility  being  incurred  by  his  master)  relations  of  debit  and  credit 
with  freemen,  offering  to  the  contracting  parties  the  guarantee  of  his  own 
peculium,  sometimes  considerable  (even  exceeding  five  minae,  equivalent  to 
675  francs)  and  always  beyond  the  control  of  his  master.  In  Egypt  and  in 
Greece,  on  the  other  hand,  where  the  master  maintains  a  legal  right  over  the 
peculium  of  the  slave,  the  former  is  responsible  for  debts  contracted  by  the 
latter.  But  in  any  case  the  use  of  the  peculium,  that  is  to  say  of  the  un- 
differentiated income  intermingled  with  mixed  income,  is,  as  always,  effected 
within  the  orbit  of  capitalistic  relationships  or  of  differentiated  income.  On 
these  matters,  consult  Kohler  and  Peyser,  Aus  dem  babyloniachen  Rechtsleben, 
Leipzig,  1890,  I,  pp.  1-7;  III,  p.  8;  Revillout,  La  creance  et  le  droit  com- 
mercial dans  Vantiquite,  Paris,  1897,  pp.  143,  et  seq.,  pp.  176-8  ;  Sayce, 
Babylonians  and  Assyrians,  London,  1900,  p.  71.  The  same  considerations 
apply,  in  conclusion,  to  the  economy  of  the  wage-system,  when  the  worker 
devotes  his  savings  to  the  employment  of  other  wage-earners,  or  lends  these 
savings  out  at  interest,  but  must  always  use  them  within  the  orbit  of  differ- 
entiated income. 


The  Forms  of  Inccnne  1 19 

who  succeed  in  obtaining  a  differentiated  income,  or  a  profit, 
are  unable  to  employ  their  savings  in  the  payment  of  wage- 
earners,  and  thus  to  found  a  capitalist  undertaking  properly 
so-called,  or  a  differentiated  income,  since  this  is  rendered 
impossible  by  the  corporative  form,  that  is  by  the  undiffer- 
entiated income,  which  rules  dictatorially  over  the  general 
order  of  the  economy  of  that  epoch. 

§  5.  Coexistence  and  Succession  of  the  Forms  of  Income 

Thus  labour  coercively  associated  with  labour  may  be, 
according  as  it  has  or  has  not  access  to  the  land,  fully  associated, 
altogether  dissociated,  or  partially  associated  with  the  owner- 
ship of  the  means  of  production,  these  variations  giving  rise  to 
the  three  correlative  forms  of  undifferentiated,  differentiated, 
and  mixed  income,  wherein  the  income  is  respectively  assigned 
in  full,  or  not  at  all,  or  partially,  to  the  labourer.  Thus,  income, 
a  phenomenon  of  production,  is  differently  assigned  according 
as  variations  occur  in  the  conditions  of  the  accessibility  of 
land  to  labour. — ^These  three  forms  of  income  can  perfectly 
well  coexist  within  one  and  the  same  social  state  ;  but  one  of 
the  two  first-named  will  necessarily  occupy  almost  the  whole 
of  the  economic  field,  restricting  the  rival  form  to  a  subordinate 
position  ;  whilst  the  mixed  form  has  an  altogether  secondary 
importance,  and  can  exist  only  within  the  interstices  of  the 
two  fundamental  forms  of  income. 

These  coexistent  forms  of  income,  together  with  the  sub- 
sistence which  is  the  complementary  element  of  income, 
constitute  the  foundation  upon  which  are  erected  the  coexistent 
social  classes.  Beyond  question,  if  we  take  for  examination 
an  economy  of  undifferentiated  income,  and  one  in  which  this 
is  the  only  form  of  income,  we  find  that  the  society  is  absolutely 
undifferentiated,  that  is  to  say,  that  social  classes  do  not  exist. 
But  as  soon  as  we  emerge  from  these  conditions  of  primitive 
homogeneity,  there  soon  appear  four  clearly  distinct  zones, 
that  of  differentiated  income,  undifferentiated  income,  onerous 
subsistences  (received  by  the  labourers),  and  gratuitous  sub- 
sistences (received  by  the  destitute) ;  whilst  mixed  income,  a 
category  which  is  hybrid  and  indecisive  in  its  nature,  does 
not  as  a  rule  constitute  an  autonomous  zone,  but  is  affiliated 
to  one  or  other  of  the  zones  previously  enumerated.    Thus, 


1 20  The  Economic  Synthesis 

when  mixed  income  is  dependent  upon  the  participation  of 
the  labourer  in  the  ownership  of  the  means  of  production, 
it  tends  to  be  affiliated  with  undifferentiated  income ;  when, 
on  the  other  hand,  mixed  income  imphes  no  more  than  a 
participation  in  income,  it  fraternises  rather  with  the  onerous 
subsistences,  which,  for  the  rest,  are  associated  by  affinity  of 
interests  with  undifferentiated  income. — ^Now,  the  four  funda- 
mental zones  of  income  and  of  subsistences  thus  delineated 
form  the  bases  of  the  four  fundamental  classes  :  the  recipients 
of  income  who  are  not  productive  labourers  (differentiated 
income),  the  productive  labourers  who  receive  the  totality  of 
the  income  (undifferentiated  income),  the  labourers  who  do 
not  receive  any  portion  of  income  (onerous  subsistence),  and 
the  non-labourers  destitute  and  without  occupation,  who 
are  reduced  to  beg  a  subsistence  from  the  charity  of  others 
(gratuitous  subsistence)  ;  to  these  must  be  added  the  auxiliary 
class  or  sub-class  of  the  productive  labourers  who  receive  a  part 
of  the  income  (mixed  income).^ 

Labour,  associated  with  labour,  and  totally  associated  with 
or  totally  dissociated  from  ownership  of  the  means  of  pro- 
duction, thus  producing  the  two  fundamental  forms  of  income, 
undifferentiated  or  differentiated,  is  subject  to  a  coercion 
which,  in  each  of  the  two  cases,  declines  in  intensity  by  three 
successive  grades,  giving  birth  to  as  many  progressive  sub- 
forms  of  income  ;  these  are,  in  the  former  case,  the  com- 
munistic, the  corporative,  and  the  co-operative  economy,  in 
the  latter  case,  slavery,  serfdom,  and  the  wage-system.  Labour 
partially  associated  with  the  means  of  production,  and  develop- 
ing side  by  side  with  any  one  of  the  various  sub-forms  of  labour 
totally  dissociated  from  or  totally  associated  with  the  owner- 
ship of  the  means  of  production,  generates  as  many  correlative 
sub-forms  of  mixed  income  ;  these  ramify  in  those  spurious 
forms  of  communism,  of  the  craft-guild,  and  of  co-operation 
which    admit    non-labourers    to    membership,    and    in    the 

*  In  the  writer's  Economic  Foundations  of  Society,  p.  212,  to  the  four 
fundamental  classes  indicated  in  the  text,  there  is  superadded  a  fifth,  that 
of  the  unproductive  laboiu-ers  ;  but  these,  on  close  consideration,  will  be 
seen  to  belong  substantially  to  the  general  category  of  the  recipients  of  income 
who  are  not  productive  labourers.  It  should,  however,  be  added  that  within 
this  category,  these  represent  a  sufficiently  striking  sub-class,  which  is  dis- 
tinguished and  contrasted  in  many  respects  from  those  sub-classes  constituted 
by  the  owners  of  productive  or  unproductive  elements. 


The  Forms  of  Incofne  1 2 1 

workshops  of  the  slave  economy,  the  serf-economy,  and  the 
wage  economy.^ 

Now  these  various  forms  of  income,  or  these  sub-forms  of 
the  two  fundamental  categories  of  income  (undifferentiated 
and  differentiated),  succeed  one  another  in  the  com-se  of 
economic  evolution  in  accordance  with  a  rule  which  can  be 
precisely  determined,  that  is  to  say  in  accordance  with  the 
progressive  degrees  of  their  productivity.  In  fact,  a  given 
form  of  income,  and  therefore  the  process  of  the  coercive 
association  of  labour  which  gives  rise  to  that  form,  is  possessed 
of  a  determinate  productive  efficiency,  rendering  possible  the 
cultivation  of  land  of  a  given  degree  of  fertihty  ;  hence,  as 
long  as  cultivation  is  restricted  to  land  endowed  with  this 
degree  of  fertility,  the  given  form  of  income  and  the  given 
form  of  the  coercive  association  of  labour  are  possible  and 
necessary.  But  as  soon  as  the  increase  of  population  enforces 
the  cultivation  of  additional  and  less  productive  land,  this 
form  of  income,  and  correlatively  this  form  of  the  coercive 
association  of  labour,  which  have  hitherto  sufficed  to  make 
use  of  the  relatively  fertile  land  under  cultivation,  prove 
inadequate  to  fructify  the  less  fertile  land  now  of  necessity 
brought  into  cultivation,  and  it  is  therefore  necessary  for  the 
existing  form  of  income  to  be  replaced  by  a  more  productive 
form.  2    The  new  form  of  income  which  now  makes  its  appear- 

^  It  follows  from  this  that  the  customary  distinction  of  economic  forms 
into  the  two  great  categories  of  collective  property  and  private  property, 
does  not  go  to  the  root  of  the  matter,  for  this  distinction  separates  economic 
forms  substantially  identical,  and  assimilates  economic  forms  essentially 
disparate.  In  fact  the  communistic  economy  is  not  substantially  different 
from  certain  forms  of  the  individualistic  economy,  such  as  the  corporative 
and  co-operative  economies ;  whereas  the  corporative  and  co-operative 
economies  are  substantially  different  from  the  other  forms  of  individualistic 
economy,  from  slavery,  serfdom,  and  the  wage-system.  More  correct  is  the  dis- 
tinction made  by  Tugan-Baranovski  {Theoretische  Grundlagen  des  Marxismus, 
Leipzig,  1905,  pp.  220-1)  between  the  harmonic  social  forms  (economy  of  the 
isolated  labourer  producing  for  direct  consumption  or  for  exchange,  and  the 
socialist  economy)  and  the  antagonistic  social  forms  (slavery,  serfdom,  and 
capitalism).  This  distinction  coincides  on  the  whole  with  that  between  un- 
differentiated and  differentiated  income,  but  it  wrongly  includes  in  the  series 
an  economic  form  which  has  never  yet  existed  (the  socialist  economy)  ;  and 
it  erroneously  institutes  between  direct  production  and  production  for  ex- 
change an  essential  distinction  which  is  altogether  unnecessary. 

'  "  I  tliink  we  may  ascribe  the  soiu-ce  of  all  human  improvement  to  the 
pressure  of  population  on  subsistence,"  Cooper,  Lectures  on  the  Elements  of 
Political  Economy,  2nd  edition,  Colimibia,  1830,  p.  295 ;  "  The  increase  of 
population  exercises  upon  human  evolution  the  same  function  as  the  main- 
spring of  a  watch  "  Fahlbeck,  Der  Adel  Schwedens,  Jena,  1903,  p.  35. 


122  The  Economic  Synthesis 

ance  is  undifferentiated  or  differentiated  according  to  circum- 
stances. It  may  happen  that,  in  order  to  lessen  the  cost  or  the 
labour  of  the  social  transformation,  there  arises  a  form  of 
income  homogeneous  with  that  which  is  destroyed,  even  when 
a  heterogeneous  form  would  be  more  productive  ;  in  other 
words,  it  may  happen  that  the  new  form  of  income  is  differ- 
entiated or  undifferentiated  according  as  that  which  has 
hitherto  existed  has  itself  been  differentiated  or  undiffer- 
entiated. But  if  the  form  of  income  opposite  to  that  which 
has  hitherto  prevailed,  or  if  the  process  of  the  coercive 
association  of  labour  correlative  with  that  form,  be  endowed 
with  a  productivity  markedly  superior  to  that  possessed  by 
any  form  homogeneous  with  that  which  has  hitherto  existed, 
it  is  the  heterogeneous  form  that  will  gain  the  victory.  It 
may  happen  that  the  new  form  of  income  presents  a  coercion 
to  the  association  of  labour  less  intense  than  that  which  has 
prevailed  under  the  previous  form  ;  and  as  a  rule  this  is 
actually  the  case,  inasmuch  as,  ceteris  paribus,  the  productivity 
of  any  form  of  income  being  inversely  proportional  to  the 
intensity  of  the  coercion  which  prevails  thereunder,  the  new 
form  of  income  can  only  in  normal  circumstances  prove  more 
productive  than  the  form  it  replaces  in  virtue  of  the  fact  that 
it  involves  a  less  rigorous  coercion.  Moreover,  the  succeeding 
form  of  income  corresponds  to  a  lessened  degree  of  productivity 
of  the  soil,  and  therefore  to  a  diminishing  reluctance  to  the 
association  of  labour,  which  by  itself  imphes  that  a  less  intense 
coercion  is  needed.  Whence  it  follows  that  the  decUne  in  the 
productivity  of  the  land,  at  the  same  time  that  it  renders 
necessary  a  lesser  degree  of  coercion  to  the  association  of 
labour  in  order  to  endow  labour  with  greater  productivity, 
renders  this  possible,  inasmuch  as  it  correlatively  diminishes 
the  reluctance  to  the  spontaneous  association  of  labour. 
Nevertheless,  it  may  very  well  happen  that  a  particular 
economic  form,  in  virtue  of  the  powerful  coercion  to  which  it 
subjects  labour,  may  present  a  superior  potency  in  respect  of 
the  organisation  of  labour  ;  and  in  that  case  the  economic 
form  which  involves  a  more  energetic  coercion  of  the  associated 
labourers  is  that  which  will  present  the  higher  degree  of  pro- 
ductivity, and  will  consequently  triumph.  But  in  any  case  it 
is  necessary  that  the  new  form  of  income  shall  present  a 


The  Forms  of  Income  123 

superior  productivity  to  that  presented  by  the  precedent 
form,  because  upon  this  superior  productivity  depends  the 
victory  of  the  new  form  over  the  form  hitherto  dominant. 

If,  on  the  other  hand,  we  study  the  succession  of  the  forms 
of  income  in  the  course  of  economic  evolution,  we  see  that  this 
evolution  begins  with  undifferentiated  income  in  the  primitive 
communist  economy,  passes  then  to  differentiated  income  in 
the  slave-holding  system,  and  that  this  form  of  income  persists 
in  the  subsequent  serf-economy,  to  lead  back,  however,  to 
undifferentiated  income  with  the  rise  of  the  guilds  ;  under 
the  wage-system  we  return  to  differentiated  income,  and  only 
sporadically  is  this  system  contrasted  by  a  more  evolved  form 
of  undifferentiated  income,  the  co-operative  economy.  Now 
we  see  here,  in  this  succession,  that  as  a  rule  the  new  income 
is  heterogeneous  to  that  which  it  replaces ;  but  this  is  not 
invariably  the  case,  for  in  the  transformation  of  slavery  into 
serfdom,  one  variety  of  differentiated  income  is  replaced  by 
another  variety  of  differentiated  income.  We  see,  further, 
that  as  a  rule  the  new  income  involves  a  less  intense  coercion 
than  that  which  it  replaces  ;  but  this  does  not  occur  in  every 
case,  for  slavery  involves  a  more  intense  coercion  than  did 
primitive  communism,  and  the  wage-economy  imposes  upon 
the  labourers  coercion  and  discipHne  far  more  rigorous  than 
were  imposed  by  the  craft-guild  or  by  the  patriarchal  industry 
out  of  whose  ruins  the  wage-economy  has  arisen.  ^  But  whether 
homogeneous  or  heterogeneous  to  the  preceding  form,  whether 
involving  a  shghter  or  a  more  intense  degree  of  coercion,  every- 
one of  the  successive  forms  of  income  in  the  series  here 
indicated  exhibits  a  process  of  the  coercive  association  of 
labour  endowed  with  a  productive  efficiency  superior  to  that 
of  the  form  which  it  replaces,  ^  that  is  to  say  this  progressive 
increase  in  productivity  constitutes  the  invariable  feature  of 
the  succession  of  the  forms  of  income. 

^  Notable  proofs  of  this  are  given  by  Mantoux,  loc.  cit.^  pp.  388,  et  seq. 

*  Hence  the  inevitable  impotence  of  all  attempts  at  the  revival  of  an  earlier 
form  of  income.  Thus,  the  omnipotence  of  Charlemagne  does  not  succeed  in 
organising  a  commimistic  economy  on  the  royal  estates,  whilst  at  this  very 
time  the  corporative  economy  is  successfully  organised  by  the  monasteries — 
the  reason  being  that  income  upon  a  communistic  foundation  has  now  become 
inefficient,  and  has  been  superseded  by  income  upon  a  corporative  foundation, 
which  is  technically  more  productive.  For  another  example,  see  Loria,  II 
capitdliamo  e  la  acienza,  p»  226. 


1 24  The  Economic  Synthesis 

But  side  by  side  with  the  fundamental  variations  in  the 
degree  of  productivity  of  the  land  which  succeed  one  another 
at  considerable  intervals  of  time,  we  have  the'  secondary 
differences  in  this  productivity  which  manifest  themselves  at 
one  and  the  same  time  in  different  regions  of  the  globe.  Now, 
just  as  the  fundamental  variations  in  the  productivity  of  the 
land  in  time  give  rise  to  the  creation  of  forms  of  income  sub- 
stantially disparate,  so  also  the  secondary  differences  in  the 
productivity  of  the  land  in  space  give  rise  to  different  manifes- 
tations, national  or  local,  of  each  form  or  sub-form  of  income. 
In  other  words,  if  the  fundamental  variations  in  the  degree  of 
productivity  of  the  land  create  as  many  economic  species 
clearly  distinguished  one  from  the  other,  the  secondary 
differences  in  the  productivity  of  the  land  which  are  insufficient 
to  effect  a  complete  change  of  economic  type,  nevertheless 
create  simple  varieties  of  or  partial  deviations  from  the 
dominant  economic  type.  Thus,  for  example,  if  we  find  that 
the  communistic  economy  and  the  slave  economy  of  early 
times  exhibit  in  Grermany  characteristics  divergent  from  those 
which  the  same  economies  exhibit  in  Rome  ;  these  differences 
are  solely  dependent  upon  the  lesser  fertility  of  the  German 
soil. 

Ordinarily  the  productivity  of  the  land  varies  only  in 
consequence  of  a  correlative  change  in  the  density  of  popula- 
tion, and  in  this  case  the  analysis  of  the  changes  in  the  former 
phenomenon  is  "per  se  an  analysis  of  the  changes  in  the  latter. 
But  it  may  happen  that  the  density  of  population  varies 
without  giving  rise  to  any  corresponding  variation  in  the 
productivity  of  the  land,  or  that  the  productivity  of  the 
land  may  vary  without  any  variation  in  population  ;  and 
in  this  case  the  density  of  population  has  an  economic 
influence  per  se,  developing  side  by  side  with  that  of 
the  productivity  of  the  land  and  independently  of  the 
latter,  so  that  this  influence  of  population  requires  inde- 
pendent examination.  Thus,  given  two  countries,  each  of 
which  exhibits  a  series  of  areas  of  land  possessing  different 
degrees  of  productivity,  that  which  has  a  greater  abundance 
of  fertile  land,  or  that  in  which  the  fertile  land  is  more  pro- 
ductive or  is  susceptible  of  more  intensive  culture,  attains 
to  a  determinate  margin  of  cultivation  with  a  population 


The  Forms  of  Income  1 25 

denser  than  that  which  will  coexist  in  the  other  country 
with  the  same  margin  of  cultivation.  Now,  in  such 
conditions,  income,  while  assuming  forms  substantially 
equivalent  in  the  two  countries,  presents  none  the  less  partial 
divergences  ;  and  these,  it  is  evident,  cannot  be  attributed 
to  the  productivity  of  land  on  the  margin  of  cultivation,  which 
is  equal  in  both  countries,  but  are  exclusively  the  outcome  of 
the  variations  in  the  density  of  population.  Or,  conversely, 
that  one  of  the  two  countries  which  has  a  greater  abundance 
of  fertile  land,  exhibits,  if  the  density  of  population  in  the  two 
countries  be  equal,  a  margin  of  cultivation  which  is  more 
productive  than  that  of  the  less  fertile  country.  Now,  in  such 
conditions,  the  structure  of  income  in  the  two  countries  will 
certainly  be  different  on  account  of  the  different  productivity 
of  the  margin  of  cultivation  ;  but  the  difference  will  be  attenu- 
ated owing  to  the  fact  that  the  density  of  population  in  the 
two  countries  is  equal.  Thus,  in  every  case,  when  the  pro- 
ductivity of  the  margin  of  cultivation  varies  independently 
of  the  density  of  population,  the  latter  exercises  its  own 
independent  influence  upon  the  forms  or  sub-forms  of  income. 
Denoting  by  the  term  economic  density  of  population  the 
pressure  of  population  upon  the  means  of  subsistence  measured 
by  the  fertility  of  the  margin  of  cultivation,  and  by  the  term 
geographic  density  of  population  the  simple  numerical  relation- 
ship between  the  population  and  the  area  of  the  territory 
under  consideration,  nations  may  be  classified  in  four  funda- 
mental groups.  There  are  countries  in  which  all  the  land 
presents  a  high  degree  of  productivity  and  which  are  thinly 
populated,  that  is  to  say  in  which  the  density  of  population  is 
low  alike  in  the  economic  and  in  the  geographic  sense  of  the 
term.  To  this  type  belong  many  Asiatic  countries,  and  the 
countries  of  Eastern  Europe,  such  as  Russia  and  Hungary. 
There  are  countries  in  which  all  the  land  is  extremely  pro- 
ductive and  which  are  thickly  populated,  which  exhibit,  that 
is  to  say,  a  low  density  of  population  in  the  economic  sense, 
but  a  high  density  of  population  in  the  geographic  sense.  Such 
are,  in  varying  degrees,  the  countries  of  Southern  Europe 
including  Italy.  There  are  countries  in  which  the  land  as  a 
whole  is  extremely  sterile,  and  where  land  of  better  quality 
is  rare,  and  comparatively  infertile,  and  in  which  therefore 


126  The  Economic  Synthesis 

there  is  attained  a  margin  of  cultivation  of  low  productivity 
with  a  very  sparse  population  ;  such  countries,  that  is  to 
say,  exhibit  a  high  economic  density  but  a  low  geographic 
density.  To  this  type  belong  the  countries  of  the  extreme 
north  of  Europe,  such  as  Sweden  and  Norway.  Finally,  there 
are  countries  in  which  there  is  extremely  sterile  land,  but 
where  fertile  areas  of  land  are  also  numerous  and  extremely 
productive,  and  which  therefore  exhibit  a  margin  of  cultivation 
of  comparatively  low  productivity  together  with  an  extremely 
dense  population,  so  that  they  present  a  high  density  of 
population  alike  in  the  economic  and  in  the  geographic  sense  ; 
to  this  group  belong  the  countries  of  Central  and  Western 
Europe,  France,  Germany,  and  England. 

The  most  superficial  observation  shows  that  the  income 
substantially  identical  in  form  (since  it  is  always  differentiated 
income  upon  the  foundation  of  the  wage-system)  flourishing 
to-day  in  these  diverse  social  groups,  presents,  nevertheless, 
extensive  differences  in  proportion  to  the  composite  influence 
of  the  varying  economic  and  geographic  density  of  the  popula- 
tion. Thus,  in  the  countries  of  the  first  group — ^parts  of  Asia, 
and  Eastern  Europe — ^thanks  to  the  twofold  involutive  influ- 
ence of  the  low  economic  and  geographic  density  of  population, 
we  find  the  maximum  reluctance  to  the  association  of  labour, 
and  therefore  the  maximum  coercion  to  that  association,  the 
minimum  efficiency  of  labour^  and  the  minimum  rapidity 
of  circulation.  These  deficiencies  are  found  also  in  the  countries 
of  the  second  group — ^those  of  Southern  Europe — but  are  here 
notably  diminished  by  the  differential  factor  of  geographic 
density,  which  in  these  countries  is  far  more  considerable.  In 
the  countries  of  the  third  group — ^those  of  Scandinavia — the 
evolutive  influence  of  the  high  economic  density  is  partially 
counteracted  by  the  involutive  influence  of  the  low  geographic 
density  ;  and  for  this  reason  the  economic  order,  whilst  more 
advanced  than  under  the  conditions  previously  considered, 
nevertheless  exhibits  in  many  respects  a  torpid  and  inert 
development.  Finally,  in  the  countries  of  the  last  group — 
those   of   Central   Europe — ^the   twofold   evolutive   factor   of 

^  "  To  the  Asiatic  to  stand  still  is  better  than  to  walk,  to  sit  is  better  than 
to  stand,  to  lie  down  is  better  than  to  sit,  to  sleep  is  better  than  to  be  awake, 
and  death  is  best  of  all  "  (Much,  Die  Heimath  der  Indo-Qermanen,  2nd  edition, 
Jena,  1904,  p.  367). 


The  Forms  of  htcome  1 27 

economic  density  and  geographic  density  of  the  population, 
impresses  upon  the  type  of  income  the  highest  possible  degree 
of  complexity  and  productive  efficiency. 

Thus,  to  limit  ourselves  to  a  single  example,  if  we  consider 
the  economic  system  of  contemporary  Norway,  we  find  that  it 
presents  specific  lineaments  by  which  it  is  very  sharply  differ- 
entiated from  the  economic  system  that  obtains  in  other  Euro- 
pean countries.  In  Norway,  in  fact,^  the  economic  order 
retains  to-day  a  strictly  patriarchal  character  :  sons,  to  a  large 
extent,  continue  in  their  fathers'  occupations  ;  the  landed  pro- 
prietors, small  or  great,  live  dispersedly  and  remote  one  from 
another,  producing  commonly  for  their  own  consumption  ; 
the  great  proprietors  exercise  as  a  rule  much  influence  over  the 
numerous  peasants  and  manufacturers  Uving  on  their  estates  ; 
the  number  of  professional  men  is  minimal  in  proportion  to  the 
extent  of  territory  ;  minimal  also  is  the  birth-rate — and 
further  this  rate  undergoes  spontaneous  restriction  as  soon  as 
the  production  of  subsistences  diminishes  ;  the  death-rate  is 
lower  than  in  any  other  country  in  Europe  or  at  any  rate 
extremely  low,  being  only  16  per  1000,  and  the  same  is  true 
of  the  consumption  of  alcohol  (2-45  litres  per  unit  of  popula- 
tion). In  Norway,  as  an  unprecedented  fact,  the  only  bank 
with  a  legal  right  to  issue  bank-notes,  which  is  simply  a  share- 
holders' company,  is  administered  by  the  National  Assembly  ; 
and  in  contradistinction  to  the  tendency  which  is  so  con- 
spicuous to-day  to  the  formation  of  great  pohtical  agglomera- 
tions, we  note  a  decentrahsing  tendency  which  has  resulted 
in  the  formation  of  an  autonomous  state.  Here  we  have  a 
world  of  artisan  individuaHsm,  industrial  or  agricultural, 
puritan,  monotonous,  pessimistic,  despising  to  an  equal  degree 
rapid  accessions  of  wealth  and  undisciphned  hardihood — ^as  we 
see  reflected  in  indelible  characters  in  the  writings  of  Ibsen. 
Now  these  differential  characteristics  of  the  Norwegian  economic 
order  are  not  dependent  upon  the  economic  density  of  the  popu- 
lation, which  is  substantially  identical  with  that  of  the  countries 
of  Central  Europe ;  they  are  the  outcome  of  the  geographic 
density  of  the  population,  which  is  in  Norway  so  greatly 
inferior  to  that  of  other  European  countries. 

But  the  national  differences  in  the  geographic  density  of  the 

^  La  Norvege,  Christiania,  1900,  pp.  211,  et  aeq.,  pp.  323-6,  pp.  401,  et  seq. 


128  The  Econo7nic  Synthesis 

population  do  not  only  modify  the  structure  of  income,  but 
they  afford  also  the  only  explanations  of  technical  and 
economic  activity,  for  these  forms  of  activity  are  more  or  less 
intimately  connected  with  the  geographic  density  of  the 
population.  Thus,  the  spirit  of  invention  is  far  more  vigorous 
and  far  more  intense  in  proportion  as  the  population  is  dense 
and  the  contacts  between  men  are  frequent.^  We  find,  in 
actual  fact,  that  the  relative  frequency  with  which  in  different 
countries  patents  are  taken  out  is,  ceteris  "paribus,  in  inverse 
ratio  with  the  average  distance  between  man  and  man,  and 
this  latter,  it  is  evident,  is  itself  in  inverse  ratio  with  the 
density  of  population  ;  that  is  to  say,  the  frequency  of  patents 
varies  directly  with  the  density  of  population.  ^ 

No  less  remarkable  is  the  fact  that  the  relationship  between 
the  quantity  of  bills  of  exchange  discounted  and  the  general 
trade  returns  is  in  inverse  ratio  to  the  density  of  population. 
This  is  explained  by  the  fact  that  as  the  population  increases 
and  contacts  between  individuals  become  easier  and  more 
frequent  the  balancing  of  debits  and  credits  becomes  easier 
and  commoner  and  therewith  there  is  proportionately  a 
smaller  need  for  the  issue  of  bank-notes.  With  this  is  associ- 
ated the  other  fact  that  the  average  life  of  bills  of  exchange  is 
in  inverse  ratio  with  the  density  of  the  population.  This  is 
readily  explained  by  noting  that  as  the  population  increases, 
exchange  becomes  more  active,  and  therewith  business 
becomes  brisker  and  settlements  are  more  promptly  effected. 
It  would  be  easy  to  give  other  analogous  examples. 

Thus,  then,  income  assumes  forms  and  sub-forms  funda- 
mentally different  at  different  times,  on  account  of  the  essential 
diversities  in  the  degree  of  productivity  of  the  soil ;  whereas 
the  form  of  income,  substantially  identical  among  the  various 
peoples  living  at  any  one  time,  and  therefore  in  conditions 
where  the  productivity  of  the  land  is  substantially  equal, 
presents  in  each  case  divergent  characteristics  dependent  upon 
the  secondary  variations  manifested  by  the  productivity  of  the 
land — or  the  economic  density  of  the  population — and  by  its 
geographic  density.  But  however  dissimilar  may  be  the  forms 
and  the  sub-forms  and  the  varieties  of  income  in  different 

*  Ravenstone,  Thoughts  on  the  Funding  System,  London,  1824,  p.  43. 

*  Dubois-Reymond,  Erfindung  und  Erfinder,  Berlin,  1906,  p.  197. 


The  Forms  of  Income  129 

times  and  in  different  places,  these  are  always  and  solely 
manifestations  and  materialisations  quantitatively  diverse  of 
a  single  fundamental  fact  —  the  coercive  association  of 
labour. — Eadem  sed  aliter.^ 

*  Galton,  Natural  Inheritance,  London,  1889,  pp.  22,  et  aeq. — "Underlying 
all  the  metamorphoses  there  are  fundamental  forces,  which  do  not  imdergo 
any  change  in  substance  in  the  course  of  centuries,  but  are  handed  down 
from  generation  to  generation.  All  that  changes  is  their  phenomenal  external 
form"  {SchMitz,  Alteraklassen  und  Mdnnerverbdnde,  Berlin,  1902,  p.  6.  See 
also  Bastian,  Der  Mensch  in  der  Oeschichte,  1860. 


CHAPTER   IV 

THE  KINDS  AND   DEGREES  OF  INCOME 

§1.  Kinds  of  Income 

The  complex  association  of  labour,  which  is  the  first  associa- 
tive method  employed  to  produce  or  to  increase  income, 
involves  per  se  that  different  individuals  or  different  social 
groups  should  be  restricted  to  different  spheres  of  production. 
From  this  fact  is  derived  a  primary  subdivision  of  the  total 
income  into  a  series  of  incomes  which  differ  one  from  another, 
agrarian  income,  manufacturing  income,  and  trading  income  ; 
and  these  are  in  turn  subdivided,  the  first  into  the  incomes 
from  agriculture,  pastoral  life,  etc.,  the  second  into  the 
incomes  from  textiles,  filatures,  metal-working,  etc. 

Side  by  side  with  and  in  succession  to  the  complex  associa- 
tion of  labour,  there  arises  the  simple  association  of  labour, 
which,  as  we  know,  demands  for  its  constitution  the  coexist- 
ence of  several  factors. — ^Now  these  factors  which  are  essential 
to  productive  association  may  well  demand  a  participation  in 
the  product  of  association,  or  in  the  income  ;  hence  there 
arises  a  new  segmentation  of  the  total  income  into  further 
parts,  each  of  which  is  assigned  to  a  different  economic  factor. 

If  the  association  of  labour  were  free,  so  that  the  producers 
were  always  mutually  interchangeable,  the  incomes  possessed 
by  individuals  of  equal  capacity  would  necessarily  be  equal. 
Now,  in  such  conditions,  the  diversity  of  the  economic  factors 
owned  and  contributed  by  the  individual  members  could  never 
give  rise  to  quantitative  differences  in  their  income  ;  that  is  to 
say,  it  would  in  practice  be  impossible  to  ascertain  the  share 
of  individual  income  attributable  to  one  factor  or  to  another. 
Hence  the  subdivision  of  the  total  income  into  various  parts 
assignable  to  the  respective  factors  of  the  productive  associa- 
tion, would  remain  purely  virtual  in  character,  and  it  would 

130 


The  Ki7tds  and  Degrees  of  Income        131 

never  become  possible  to  translate  this  subdivision  into  the 
realm  of  positive  calculations.  But  we  know  that  the  associa- 
tion of  labour  is  always  and  necessarily  coercive.  Now,  in  the 
coercive  association  of  labour,  since  the  mutual  interchange- 
abiUty  of  the  producers  is  lacldng,  differences  of  individual 
income  are  possible,  and  hence  it  is  practicable  to  attribute  the 
differential  income  received  by  an  individual  to  his  differential 
possession  of  this  or  that  economic  factor.  Thus  the  very  fact 
of  the  coercive  association  of  labour  renders  practicable  the 
segmentation  of  the  total  income  into  a  number  of  specific 
incomes  assignable  to  as  many  different  economic  factors. 

The  factors  of  the  coercive  association  of  labour  are,  above 
all,  material  and  immaterial  labour,  capital,  and  land,  or,  in 
more  general  terms,  the  productive  elements,  to  which,  in  the 
case  of  undifferentiated  income,  may  eventually  be  super- 
added the  lack  of  free  land  ;  hence  the  total  income  may  first 
of  all  be  divided  into  a  number  of  parts  assigned  to  these 
different  elements.  But  other  elements,  in  addition,  which 
do  not  contribute  to  the  coercive  association  of  labour  may 
eventually  claim  a  share  in  the  product  ;  one  of  these  is  un- 
productive labour,  in  which  must  be  included  that  specific 
element  constituted  by  the  work  of  the  state,  and  also 
unproductive  capital.  In  this  way  income,  the  total  product 
of  the  association  of  labour,  comes  to  be  subdivided  into  a 
number  of  species  or  sub-species,  the  most  important  of  which 
are  :  remuneration,  over  and  above  subsistences,  received  by 
labour,  material  or  immaterial,  productive  or  unproductive  ; 
interest  on  productive  or  unproductive  capital ;  and  the  rent 
of  land,  or  the  surplus-income  due  to  the  monopoly  of  either 
productive  or  unproductive  elements. 

These  different  kinds  of  income  can  be  classified  in  two 
fundamental  groups  as  ^iuctuatiyig  incomes  and  consolidated 
incomes.  The  former  are  exposed  by  their  nature  to  perennial 
oscillations,  and  cannot  expand,  or  even  persist,  except  in 
virtue  of  an  incessant  struggle  against  the  rival  incomes  ; 
whereas  the  latter  are  by  nature  more  constant  and  less 
exposed  to  conflicts,  and  therefore  demand  from  their  owners 
less  jealous  watchfulness.  To  the  former  group  belong  the 
interest  of  productive  capital  and  the  interest  of  the  hazardous 
forms  of  unproductive  capital  (capital  employed  on  the  stock 


132  The  Econofnic  Synthesis 

exchange) ;  to  the  latter  group  belong  rent  (especially  urban 
rent),  and  the  interest  on  the  less  hazardous  forms  of  unproduc- 
tive capital  (pubhc  debt).^ 

Precisely  on  account  of  the  fact  that  the  subdivision  of 
income  into  different  kinds  is  the  outcome  of  the  extremely 
general  phenomenon  of  the  coercive  association  of  labour,  this 
subdivision  makes  its  appearance  in  all  the  forms  of  income, 
since  all  these  emanate  from  the  coercive  association  of  labour 
— ^ahke  in  the  case  of  differentiated  and  of  undifferentiated 
income.  Even  in  the  case  of  undifferentiated  income,  a  part 
may  often  be  distinguished  constituting  the  interest  of  pro- 
ductive capital,  for  this  latter  manifests  itself  sporadically 
within  the  communistic,  the  corporative,  and  the  co-operative 
economies.  Yet  more  clearly,  in  undifferentiated  income,  does 
interest  on  unproductive  capital  make  its  appearance  ;  for  we 
see  usury  and  trading  enterprise  thrusting  parasitic  tentacles 
into  the  system  of  the  medieval  craft-guilds,  and  robbing  these 
of  their  best  fruits.  ^  Unproductive  labour  may  also  manifest 
itself  in  this  form  of  income,  if  only  as  administrative  and 
legal  labour,  and  to  this  extent  there  must  exist  remuneration 
for  unproductive  labour.  Nor,  finally,  is  differential  rent 
absent  from  this  form  of  income  ;  for  differential  rent  makes 
its  appearance  wherever  the  different  communistic,  corporative, 
or  co-operative  undertakings  are  estabhshed  upon  lands  of 
varying  degrees  of  fertihty. 

It  is  no  less  true,  however,  in  the  case  of  undifferentiated 
income,  that  the  individual  kinds  of  income  are  ordinarily 
confounded  in  such  a  way  as  to  render  it  difficult  to  distinguish 
between  them. — ^It  is  part  of  the  very  nature  of  this  economic 
form  that  only  in  the  ideal  sphere  are  the  individual  kinds  of 
income  separable  from  subsistence,  whereas  in  the  concrete 
they  are  fused  with  subsistence,  and  are  all  received  by  the 

1  Thus  in  England  it  has  been  observed  that  the  gross  income  recorded 
in  the  Income  Tax  returns  imder  Schedules  A  and  B  (agricultural),  schedule  C 
(interest  on  public  debt),  and  E  (remuneration  of  unproductive  labour), 
remains  almost  unaffected  by  commercial  crises  ;  whereas  the  income  re- 
tiumed  imder  schedule  D  (manufacturing  and  trading  incomes)  presents  a 
notable  decUne  at  every  period  of  crisis  (Lescure,  Dea  crises  gendrales  et 
p&iodiques  de  production,  Paris,  1907,  p.  397). 

*  Cf.  Biicher,  Die  Entstehung  der  Volkswirt.,  p.  238.  Hence,  the  assertion 
of  Ricardo  {loc.  cit.,  p.  150,  note)  that  capital  is  always  employed  productively, 
whilst  completely  erroneous  as  regards  differentiated  income,  is  not  altogether 
true  even  as  regards  undifferentiated  income. 


The  Kinds  and  Degrees  of  Income        133 

productive  or  unproductive  labourer.  Moreover,  on  the  other 
hand,  the  various  kinds  of  income  are  received  by  one  and  the 
same  person,  for  the  owner  of  capital  is  at  the  same  time  owner 
of  the  land.  Hence,  in  such  conditions,  the  distinction  between 
the  respective  kinds  of  income  is  to  a  large  extent  obscured. 

In  addition,  it  often  happens  that  in  this  economic  form  one 
or  other  kind  of  income  does  not  succeed  in  establishing  itself. 
Thus,  the  interest  of  productive  capital  is  absent  from  the 
normal  corporative  economy,  or  from  the  typical  form  of  the 
medieval  craft-guild  ;  whilst  differential  rent  is  suppressed 
or  eHminated  in  the  communistic  economy,  in  which  those 
whose  land  is  comparatively  infertile  are  compensated  by  the 
grant  of  larger  areas. 

But  the  distinction  between  the  specific  kinds  of  in- 
come is  manifested  far  more  decisively  in  the  case  of 
differentiated  income.  Undoubtedly  it  may  happen,  even 
in  this  form  of  income,  that  certain  kinds  of  income  are 
lacking  ;  for  we  find  examples  of  the  economy  of  differentiated 
income  in  which  profit  of  any  kind  fails  to  make  its  appearance 
(for  example,  in  ancient  Egypt,  and  in  the  earliest  days  of 
classical  Rome,  loans  receive  no  interest)  ;  whilst  differential 
rent  may  be  wanting  in  consequence  of  the  uniform  fertility  of 
the  cultivated  lands.  Speaking  generally,  however,  in  the 
economy  of  differentiated  income,  there  is  estabhshed  and 
normally  developed  every  kind  of  income,  and  those  in 
especial  are  developed  which  undergo  enduring  suppression  in 
the  rival  form  of  income,  such  as  the  interest  of  unproductive 
capital,  and  the  rent  of  landed  property  ;  whilst  those  par- 
ticular kinds  of  income  which  are  common  to  undifferentiated 
and  differentiated  income,  exhibit  in  the  case  of  the  latter  a 
fuller  and  more  striking  devolopment.  Finally,  the  complexity 
of  the  kinds  of  income  attains  a  maximum  degree  in  the  case 
of  mixed  income,  where,  in  addition  to  all  the  kinds  of  income 
hitherto  mentioned,  we  find  also  the  undifferentiated  income 
of  the  productive  labourer  who  is  employed  by  the  non- 
labourer. 

Differentiated  income,  therefore,  or  mixed  income,  may  be 
immediately  received  in  its  entirety  by  productive  capital ; 
but  this  latter  cannot  retain  the  whole  of  it  for  itself,  for  it 
must  eventually  allot  a  portion  to  productive  labour,  and 


134  The  Economic  Synthesis 

must  necessarily  allot  other  portions  to  the  land  taking  part 
in  the  association  of  labour,  to  capital,  and  to  unproductive 
labour.^ 

Not  only  do  the  individual  species  of  income  display  plainly 
dissimilar  manifestations  in  the  different  forms  of  income,  but 
they  also  display  manifestations  differing  in  certain  respects  in 
the  successive  phases  of  the  same  form  of  income,  undiffer- 
entiated or  differentiated.  Thus,  the  remuneration  of  the 
labour  of  superintendence  differs  in  character  and  in  extent  in 
the  corporative  and  in  the  co-operative  economies,  in  the 
slave-system  and  in  the  wage-system. — ^The  interest  of  un- 
productive capital  assumes  different  characters  in  the  various 
sub-forms  of  differentiated  income,  in  accordance  with  differ- 
ences in  the  function  and  extent  of  unproductive  capital. 
Whereas,  in  fact,  in  the  ascendent  phase  of  every  form  of 
income,  the  function  of  unproductive  capital  is  to  secure  that 
supervaluation  of  the  productive  element  upon  which  the 
persistence  of  income  depends,  in  the  declining  phase  its 
function  is  to  depress  subsistence. — ^The  interest  of  superfluous 
capital,  that  is  of  capital  which  is  unable  to  find  a  profit  in 
normal  fields,  has  different  characters  in  the  different  forms  of 
income  ;  whilst,  in  the  various  forms  of  income,  when  the 
character  and  the  extent  of  unproductive  labour  undergo 
changes,  there  occur  correlated  variations  in  the  extent  and 
the  nature  of  the  remuneration  assigned  to  such  labour.  ^ — 
Finally,  as  the  total  income,  in  each  successive  form  of  income, 

*  Ramsay  makes  a  sound  distinction  between  the  capitalist  entrepreneur 
as  the  distributor  of  national  income  (and  it  must  be  understood  that  this 
applies  only  to  differentiated  income)  and  the  individuals  having  claims  on 
income — lenders,  owners,  etc.  {Essay  on  the  Distribution  of  Wealth,  Edinburgh, 
1836,  pp.  218-9).  This  view  is  a  much  juster  one  than  that  of  Walras,  that 
this  function  belongs  to  the  entrepreneur  simply  as  such. 

*  The  remuneration  of  improductive  labom-  differs  in  character  and  in 
extent  according  as  it  is  based  simply  upon  a  participation  in  income,  or  in 
addition  upon  a  participation  in  the  ownership  of  the  means  of  production. 
Thus,  when  Csesar  divides  up  the  large  landed  estates,  to  distribute  them 
among  the  proletarians,  diminishing  correlatively  the  distributions  of  corn 
in  the  city,  the  unproductive  labour  of  the  clients,  hitherto  sharing  solely  in 
income,  now  comes  to  share  in  the  ownership  of  the  means  of  production  ;  and 
the  same  things  occurs,  on  a  vaster  scale,  in  the  Middle  Ages,  when  the 
ecclesiastics  obtain,  in  place  of  an  endowment  payable  in  products  or  in  money, 
a  definite  assignment  of  landed  property.  In  such  conditions,  however,  the 
clients  and  the  ecclesiastics  become  in  substance  the  owners  of  the  means 
of  production,  and  differ  from  other  owners  only  in  respect  of  the  way  in 
which  they  obtained  possession  of  their  property. 


The  Kinds  and  Degrees  of  Income        135 

becomes  more  refined  and  more  coniplex,  so  in  each  successive 
form  do  there  appear  more  numerous  species  or  sub-species  of 
income,  the  more  complex  is  each  of  these  in  itself,  and  the 
more  dehcate  and  complicated  are  the  relationships  which 
prevail  among  them. 

If  it  happens,  in  this  respect,  that  the  form  or  sub-form  of 
income  exercises  an  influence  upon  the  existence  and  upon  the 
number  of  the  varieties  of  income,  it  is  also  true,  conversely, 
that  the  kind  of  income  may  react  upon  the  form.  Thus,  when 
incomes  have  newly  been  obtained  by  speculation,  independ- 
ently of  labour  or  of  diligence  on  the  part  of  the  recipients, 
these  are  likely  to  renounce  labour,  so  that  the  income  will  be 
transformed  from  undifferentiated  into  differentiated  income. 

If,  now,  we  enquire  according  to  what  measure  income  is 
distributed  among  the  sub-species  previously  enumerated,  we 
find  that  the  laws  of  such  distribution  are  substantially 
different  according  as  there  does  or  does  not  exist  mutual 
interchangeability  among  the  owners  of  the  productive  and 
unproductive  elements.  For,  if  each  one  of  these  can  at  any 
moment  exchange  his  condition  for  that  of  any  of  the  others, 
the  income  is  distributed  among  them  in  proportion  to  the 
cost  borne  by  each  ;  whereas,  if  this  complete  mutual  inter- 
changeability among  the  owners  is  lacking,  the  income  is 
distributed  among  the  various  productive  and  unproductive 
elements  in  proportion  to  the  varying  degrees  of  limitation 
inherent  in  these  elements  themselves. 

Thus,  putting  out  of  consideration  for  the  sake  of  simphcity 
the  unproductive  elements,  if  the  owners  of  the  labour,  the 
capital,  and  the  land  contributing  to  the  production  are 
mutually  interchangeable,  the  income  is  distributed  among 
these  elements  in  proportion  to  their  cost.  Therefore,  since 
the  cost  of  the  land  'per  se  is  zero,  this  has  no  share  in  the 
income,  which  is  distributed  exclusively  among  the  other 
productive  elements,  in  proportion  to  their  cost. — ^If,  on  the 
other  hand,  the  owners  of  these  elements  are  not  mutually 
interchangeable,  these  same  elements  participate  in  the  total 
income  in  proportion  to  the  different  degrees  of  limitation  they 
exhibit.  Hence,  in  such  conditions,  the  land,  an  element 
without  cost,  participates  in  income  as  soon  as  the  supply  of  it 
is  limited  ;  whereas  labour,  an  element  endowed  with  cost,  is 


136  The  Economic  Synthesis 

excluded  from  all  share  in  income,  or  reduced  to  an  evanescent 
sha,re,  as  soon  as  the  supply  of  it  is  unlimited  or  insufficiently 
limited. — ^In  this  way,  according  as  the  owners  of  the  pro- 
ductive elements  are  or  are  not  mutually  interchangeable,  the 
conditions  of  land  and  of  labour  are  radically  inverted  ;  for 
in  the  former  case  the  land  is  excluded  from  any  share  in  the 
income,  and  labour  obtains  a  share  ;  while  in  the  latter  case  the 
conditions  are  reversed. 

If  the  two  fundamental  factors  regulating  the  distribution  of 
income  are  cost  and  limitation,  it  is  obvious  that  all  the  influ- 
ences effecting  a  change  in  one  or  other  of  these  factors  must 
indirectly  effect  a  change  in  the  distribution  of  income. — Thus, 
the  number  of  the  unities  composing  a  given  element,  pro- 
ductive or  unproductive,  or  its  total  quantity,  do  not  per  st 
exercise  an  influence  upon  the  division  of  income  among  the 
various  kinds,  but  they  exercise  an  indirect  influence  when 
they  act  or  may  act  upon  the  cost  or  upon  the  limitation  of 
these  elements.  In  fact,  it  is  evident  that  the  greater  the  total 
quantity  of  a  given  element,  the  greater  as  a  rule  is  the  cost 
therein  contained,  but  the  less  proportionately  is  its  hmitation. 
Therefore,  in  conditions  of  mutual  interchangeability,  this 
share  of  income  assigned  to  the  individual  productive  and 
unproductive  elements,  being  commensurate  with  the  cost  of 
these,  is  in  direct  ratio  with  their  quantity  ;  whereas,  on  the 
other  hand,  where  mutual  interchangeabihty  does  not  exist, 
the  share  of  the  individual  elements  in  the  income,  being 
commensurate  with  the  Hmitation  of  these,  is  in  inverse  ratio 
with  their  quantity. 

It  may  happen,  however,  that  the  two  laws  regulating  the 
division  of  income  operate  conjointly,  or  that  the  division  is 
effected  in  accordance  with  cost  and  with  limitation  at  one  and 
the  same  time. — ^For  example,  even  in  conditions  of  normal 
mutual  interchangeability  of  the  productive  elements,  such 
as  exclude  in  normal  circumstances  the  participation  in 
income  of  the  elements  which  are  without  cost,  land  of  ex- 
ceptional fertihty,  since  its  supply  exhibits  special  conditions 
of  limitation,  obtains,  or  may  obtain,  thanks  to  these  special 
conditions,  a  share  of  the  total  income. 

It  may  generally  be  said  that  income  is  divided  among  the 
individual  productive  and  unproductive  elements  in  propor- 


The  Kinds  and  Degrees  of  Income        137 

tion  to  their  value,  which,  in  conditions  of  complete  mutual 
interchangeabihty  among  the  owners  of  these  same  elements,  is 
commensurate  with  their  cost  ;  whereas  in  the  reverse  con- 
ditions it  is  commensurate  with  their  limitation,  and  may 
rise  to  that  level  beyond  which  the  remuneration  of  the  other 
necessary  elements  is  insufficient  to  secure  the  continuity 
of  their  supply.^  But  this  duplex  method  of  regulation  is 
vaHd  only  with  respect  to  the  remuneration  of  the  individual 
elements  in  their  totahty  ;  it  does  not  apply  to  the  division  of 
the  total  income  received  by  a  single  element,  productive  or 
unproductive,  among  the  sub-species  of  that  income.  In  so 
far  as  the  owners  of  the  various  sub-species  of  a  single  pro- 
ductive or  unproductive  element  are  mutually  interchangeable 
one  with  another,  it  follows  that  in  every  case  the  total  income 
received  by  a  given  element,  as  determined  by  the  rule  of  cost 
or  by  that  of  limitation,  is  distributed  among  its  sub-species 
in  accordance  with  their  respective  cost. — For  example,  if  the 
total  capital  or  the  total  immaterial  labour  participate  in  the 
total  income  in  a  measure  determined  by  the  rule  of  cost  or  by 
that  of  limitation,  the  allotment  of  the  various  kinds  of  capital 
(agrarian,  manufacturing,  trading,  etc.),  or  of  immaterial 
labour  (productive,  unproductive,  etc.),  is  in  every  case  pro- 
portional to  the  cost,  or  to  the  entity  of  the  respective  capitals 
invested,  or  of  the  respective  labours  furnished. 

Now,  inasmuch  as  the  coercive  association  of  labour  excludes 
the  complete  mutual  interchangeabihty  of  the  owners  of  the 
various  productive  or  unproductive  elements,  so,  given  the 
coercive  association  of  labour,  the  division  of  the  income  in 
accordance  with  the  absolute  principle  of  cost  can  no  longer 
be  effected. — Since,  however,  the  interchangeabihty  of  the 
various  owners  is  greater  in  the  case  of  undifferentiated  income 
than  in  the  case  of  differentiated  income,  it  follows  that  un- 
differentiated income  is  distributed  among  its  various  kinds 
chiefly  according  to  the  principle  of  cost,  and  differentiated 
income  chiefly  according  to  the  principle  of  limitation,  without 

^  Compare  the  observations  of  Stoltzmann  {Die  soziale  Kategorie  in  der 
VolkswirtschaftsleJire,  Berlin,  1896,  pp.  41,  et  seq.),  who  endeavours  to  show 
that  the  quota  of  product  received  by  the  individual  productive  factors  is 
measured  solely  by  their  relative  force,  and  not  by  their  productivity.  But 
this  force  is  in  its  turn  commensurate  with  cost  or  with  limitation,  according 
as  the  owners  of  the  various  productive  and  unproductive  elements  are  or 
are  not  mutually  interchangeable. 


138  The  Economic  Synthesis 

excluding  the  possibility,  in  each  of  these  forms  of  income,  of 
the  exceptional  intervention  of  the  opposite  principle  of 
distribution.  Thus,  in  the  regime  of  undifferentiated  income, 
if  the  land  of  the  different  productive  undertakings  is  un- 
equally fertile,  the  more  fertile  area  participates  in  the  income 
to  a  greater  extent,  corresponding  precisely  to  the  degree  of  its 
limitation  ;  so,  conversely,  under  the  regime  of  differentiated 
income,  there  may,  in  exceptional  cases,  result  the  assignment 
of  a  part  of  the  income  in  proportion  to  the  labour  furnished. — 
But  it  always  remains  true  that  the  fundamental  subdivision 
of  income  into  its  sub-species  is,  in  the  case  of  undifferentiated 
income,  effected  chiefly  according  to  the  rule  of  cost,  and  in  the 
case  of  differentiated  income,  chiefly  according  to  the  rule  of 
limitation.  Whereas,  therefore,  in  the  case  of  undifferentiated 
income,  the  land,  an  element  without  cost,  does  not  share  in 
income,  and  labour,  a  costly  element,  shares  in  eminent  degree 
— ^in  the  case  of  differentiated  income,  the  land,  being  a  limited 
element,  shares  in  income,  whereas  labour  shares  only  when 
limited  in  supply.  And  whilst,  in  undifferentiated  income, 
the  remuneration  of  the  labourers  is  directly  proportional  to 
their  number,  in  differentiated  income,  this  remuneration  is 
inversely  proportional  to  their  number. 

But  the  distribution  of  income,  besides  being  subject  to 
laws  diametrically  opposed  in  the  two  fundamental  forms  of 
income,  presents  also  different  characteristics  in  the  successive 
phases  of  one  and  the  same  form  of  income,  according  as 
changes  occur  in  the  quantitative  proportions  among  the 
various  kinds  of  income,  and  according  as  there  are  differences 
as  to  the  kind  of  income  which  prevails  in  the  form  in  question. 
It  is  a  well-known  fact  that  income  from  immovable  and 
income  from  movable  property  prevail  alternately  in  the 
economic  system  of  the  nations,  and  that  to  a  period  character- 
ised by  abnormal  expansion  of  the  income  from  real  property, 
there  succeeds,  as  it  were  by  reaction,  a  period  characterised 
by  the  advance  and  prepotency  of  the  income  from  personal 
property,  and  conversely.  Thus,  to  the  economic  omnipotence 
and  reactionary  tendencies  of  the  landed  proprietors,  which 
persisted  down  to  the  opening  of  the  modern  age,  there  succeeds 
the  luxuriant  and  vigorous  expansion  of  industry,  of  trade, 
and  of  speculation  (as  examples  of  the  last-named  may  be 


The  Kinds  and  Degrees  of  Income        139 

mentioned  the  Tulip  Mania  in  Holland  in  1634,  and  the  South 
Sea  Bubble  in  England  in  1720),  which  finds  its  appropriate 
theoretical  exposition  in  the  Mercantile  System. — Conversely, 
in  classical  Rome,  during  the  last  days  of  the  RepubMc,  the 
wasteful  extravagance  of  the  farmers  of  the  taxes,  the  monopo- 
lists of  unproductive  capital,  at  the  expense  of  the  unfortunate 
provinces,  arouses  aversion  to  bankers'  profits,  and  leads  to 
the  widespread  idealisation  of  rural  hfe  ;  and  it  is  then 
(37  B.C.)  that  Varro  writes  his  Treatise  on  Agriculture  and 
Virgil  his  Georgics.  The  same  considerations  apply  to  France, 
where  the  insane  speculations  of  Law  give  rise  by  reaction  to 
a  frenzied  admiration  of  rural  life  ;  and  the  luxuriance  of  the 
physiocratic  school  of  economics  is  nothing  more  than  the 
reflex  and  the  outcome  of  this  return  to  agricultural  industry.^ 
However,  these  alterations  notwithstanding,  the  general 
course  of  economic  evolution  is  constantly  towards  the  pro- 
gressive pre-eminence  of  movable  wealth  over  immovable 
wealth,  as  is  clearly  proved  by  statistics. 

If  from  the  crude  distinction  between  the  income  from 
immovable  property  and  that  from  movable  property,  we 
proceed  to  the  more  minute  and  scientific  distinction  between 
incomes  of  various  kinds,  we  soon  perceive  that  the  ratios 
among  these  are  subject,  in  the  evolution  of  a  single  form  of 
income,  to  the  most  energetic  oscillations,  for  there  are  un- 
ceasing changes  in  the  cost  or  in  the  limitation  of  the  individual 
productive  or  unproductive  elements,  that  is  to  say,  in  the 
factors  upon  which  the  subdivision  of  the  income  depends.  ^ 
Thus,  turning  our  attention  to  differentiated  income,  which, 
owing  to  its  complexity,  better  lends  itself  to  this  investigation, 
we  find  that  in  ascendent  periods,  in  which  technique  is  evolved 
and  progressive,  the  decHne  in  the  productivity  of  the  soil 
is  correlatively  slight,  and  for  this  reason  the  hmitation 
of  land  is  also  little  marked. — On  the  other  hand,  an  increase 
in  savings  and  in  population,  and  still  more  the  growth  of 
urban  agglomerations,  increase  the  limitation  of  one  kind  of 

^  Blanqui,  Histoire  de  Veconomie  politique,  Paris,  1859,  p.  139  ;  Karejew 
[The  Peasants  and  the  Agrarian  Question  in  France],  Moscow,  1879,  p.  217. 

*  Adam  Smith,  loc.  cit.,  pp.  212,  et  seq.  ;  Ganilh,  Systemes  d'iconomie 
politique,  Paris,  1821,  II,  pp.  345,  et  seq.  ;  John  Stuart  Mill,  loc.  cit.  ;  Roscher, 
Qrundlagen,  pp.  345,  et  seq. — liave  drawn  attention  to  the  varying  prevalence 
of  the  different  kinds  of  income  in  periods  in  which  an  economy  is  respectively 
advancing,  stationary,  or  in  a  state  of  decline. 


140  The  Economic  Synthesis 

land,  that  is,  of  building  land,  thus  increasing  the  share  of 
this  element  in  the  total  income  ;  whilst  proportionately  there 
occurs  an  increase,  owing  to  the  very  exuberance  in  the  pro- 
duction of  wealth,  in  the  numerous  forms  of  unproductive 
labour  and  of  unproductive  capital.  Since,  however,  in  these 
ascendent  periods,  there  is  an  abundance  of  safe  openings  for 
the  employment  of  unproductive  capital,  it  results,  in  this 
economic  phase,  that  secure  incomes  are  more  prevalent  than 
speculative  incomes  ;  or,  to  put  the  matter  in  other  words, 
during  ascendent  periods,  consolidated  incomes  tend  to  prevail, 
or  to  occupy  a  share  of  income  relatively  and  absolutely  greater 
than  that  occupied  by  fluctuating  incomes.  But  in  conditions 
in  which  technique  is  backward  or  in  a  state  of  decline,  since 
the  diminution  in  the  productivity  of  the  soil,  or  of  the  capitals 
successively  employed  in  working  the  soil,  is  more  marked,  the 
limitation  of  land  becomes  accentuated  ;  on  the  other  hand, 
while  saving  increases,  the  limitation  of  capital  diminishes  ; 
hence  there  results  a  constant  rise  in  the  rent  of  agricultural 
landed  property  and  a  fall  in  the  rate  of  profit  and  interest, 
which  may  ultimately  lead  to  a  diminution  in  the  total  quantity 
of  profit  notwithstanding  the  increase  of  saving.^ — In  such 
conditions,  then,  agricultural  rent  tends  to  represent  an 
increasing  proportion,  and  the  profit  of  capital  a  decreasing 
proportion,  of  the  total  income.  But  it  is  precisely  the  low 
rate  of  profit  earned  by  capital  solidly  invested  which  invites, 
in  these  periods  of  decline,  the  employment  of  capital  in 
speculative  investments  ;  and  this  gives  rise  to  a  prevalence 
of  fluctuating  incomes  over  consolidated  incomes. 

In  this  way  the  territory  of  the  total  income,  which  at  the 
first  glance  appears  compact  and  homogeneous,  divides  itself, 
like  the  territory  of  the  primitive  community,  into  a  pluraUty 

1  Cf.  Ricardo,  loc.  cit.,  p.  69,  and  John  Stuart  Mill,  Principles,  p.  433. 
Unquestionably  at  first  sight  it  seems  irrational  that  capital  should  continue 
to  be  saved  when  this  leads  to  the  diminution,  not  only  of  the  rate  of  profit, 
but  also  of  the  real  or  total  profit  accrueing  to  the  capitalists  ;  and  it  would 
seem  at  first  sight  more  reasonable  for  these  latter  to  discontinue  saving  as 
soon  as  saving  leads  to  a  diminution  of  the  real  profit,  or  even  when  saving 
no  longer  causes  an  increase  in  such  profit.  But  the  saving  of  new  capital 
diminishes  the  total  profit,  for  the  reason  that  it  diminishes  the  profit  of  the 
capital  already  in  use  by  a  quantity  greater  than  the  equivalent  of  the  profit 
of  the  capital  newly  invested.  This  does  harm  to  the  capital  already  invested, 
but  creates  for  the  newly  saved  capital  a  profit  that  would  not  be  received  had 
this  new  capital  not  been  saved — and  this  suffices  to  lead  to  the  incessant 
saving  of  new  capital. 


The  Kinds  and  Degrees  of  Income        1 4 1 

of  zones,  each  representing  or  comprehending  a  different  kind 
of  income.  But  just  as  the  individual  members  of  the  primitive 
collectivity  receive  each  a  portion  of  land  in  each  of  the  different 
zones  of  territory,  so  that  their  landed  property  consists  of  a 
pluraHty  of  different  lots — so  also  the  recipients  of  income 
are  not  confined,  or  are  not  necessarily  confined,  to  a  single 
one  of  the  zones  into  which  the  entire  territory  of  income 
is  subdivided,  but  may  occupy  ground  in  several  of  these  zones, 
or  even  in  all.  In  other  words,  the  income  of  a  given  individual 
need  not  necessarily  consist  of  rent  alone,  or  of  profit  alone, 
etc.,  but  may  be  a  mixture  of  several  kinds  of  income,  consist- 
ing at  one  and  the  same  time  of  the  rent  of  landed  property, 
the  interest  of  productive  or  unproductive  capital,  the  re- 
muneration of  unproductive  labour.  Indeed,  as  a  general 
rule,  each  individual  receives  several  incomes  of  different  kinds, 
whereas  the  reduction  of  the  recipient  of  income  to  a  single 
land  of  income  is  a  phenomenon  altogether  exceptional  in 
character,  occurring  rather  in  the  Hght  of  a  simplifying  hypo- 
thesis than  in  the  actual  light  of  complex  reaHty.  In  truth,  the 
landowner,  the  capitahst,  the  simple  entrepreneur,  these  in- 
dividuals whom  the  classical  science  of  economics  assumes  as 
objects  of  study,  and  who  constitute  the  monotonous  dramatis 
personcB  of  the  intellectual  dramas  of  that  science,  are  creations 
of  pure  fancy,  whom  we  do  not  encounter  in  real  life.  The  man 
who  lives  beside  us,  the  man  whom  we  meet  in  the  street, 
when  he  is  not  a  labourer,  has  at  one  and  the  same  time  a 
corner  of  land,  industrial  shares,  and  securities  in  the  bank, 
and  perhaps  practises  simultaneously  some  lucrative  pro- 
fession. That  is  to  say,  in  actual  life  we  do  not  find  capitahsts 
or  landowners,  entrepreneurs  or  unproductive  labourers,  but 
simply  recipients  of  income — who  draw  receipts  at  one  and 
the  same  time  from  some  or  all  of  the  sources  of  income.^ 
From  this  twofold  series  of  facts,  the  subdivision  of  income 

^  Ferrara,  whose  aim  it  appears  to  be  to  cancel  every  kind  of  distinction 
in  the  field  of  economic  science,  for  he  endeavours  to  annul  the  most  widely 
accepted  distinctions  between  gross  product  and  net  product,  between 
material  and  immaterial  wealth,  material  and  immaterial  labour,  precious  and 
non-precious  metals,  labour  and  capital,  capital  and  land,  agricultural  industry 
and  manufacturing  industry,  profit  and  rent,  Ricardo  and  Carey — has  never- 
theless reason  on  his  side  when  he  denies  the  existence  of  a  rigid  distinction 
of  persons  as  between  the  possessors  of  the  various  kinds  of  income  {Intro- 
duzione  alia  Bib.  Ec,  series  II,  Vol.  Ill,  p.  128).  Cf.  also  Fisher,  The  Rate 
of  Interest,  p.  230. 


142  The  Eco7tomic  Synthesis 

into  many  species,  and  the  agglomeration  of  many  species  of 
income  into  the  hands  of  a  single  individual,  it  follows  that  it 
is  necessary  to  distinguish  income,  from  net-produce.  In  truth, 
this  distinction  is  superfluous  where  social  income  is  con- 
cerned ^ ;  for  this  is  precisely  equal  to  the  total  net-produce  of 
the  productive  elements  (capital  and  land),  just  as  the  social 
income  of  a  given  kind  is  equal  to  the  total  net-produce  of  a 
given  specific  element,  productive  or  unproductive.  But 
there  is  excellent  reason  to  draw  such  a  distinction  where 
individual  income  is  concerned  ;  for  the  net-produce  of  a 
certain  quantity  of  a  given  element,  productive  or  unpro- 
ductive, may  very  well  furnish  several  different  incomes  to  as 
many  different  persons — ^for  example  the  net-produce  from  a 
landed  estate  may  give  rise  to  two  different  incomes,  going 
severally  to  the  landowner  and  to  the  mortgagee  ;  just  as, 
conversely,  the  net-produce  derived  from  several  different 
masses  of  productive  or  unproductive  elements  may  furnish 
the  income  of  a  single  individual — ^for  example,  the  income  of 
an  individual  may  consist  of  the  rent  of  a  portion  of  land  and 
of  the  profit  of  a  quantity  of  capital,  etc. 

This  subdivision  of  individual  income  among  the  various 
kinds  of  income  is  not,  for  the  rest,  the  outcome  of  a  capricious 
love  of  variety,  but  is  imposed  by  the  most  elementary  rule  of 
wise  administration,  which  teaches  that  personal  well-being 
and  independence  should  not  be  hazarded  upon  a  single 
venture.  In  fact,  since  the  rent  of  land  and  the  profit  of 
capital  vary  inversely,  one  increasing  as  the  other  declines, 
it  follows  that  the  distribution  of  individual  income  between 
the  two  fundamental  kinds  of  income,  that  from  landed  and 
that  from  movable  property,  constitutes  the  simplest  method 
of  self -insurance,  for  this  compensates  for  the  lesser  yield  of 
one  venture  by  the  more  abundant  yield  of  another. — ^Nor  is 
this  enough  ;  for  the  income  from  movable  property  itself 
must  not  be  concentrated  in  a  single  kind  or  derived  from  a 
single  security,  but  rather  distributed  among  many  such,  in 
order  to  compensate  for  the  deficiencies  that  may  arise  in 
some  of  these,  by  the  possible  greater  success  of  the  others.  ^ 

*  Lexis,  Wdrterhuch  der  Volkstoirtachaft,  v.  Einkommen. 

*  Leroy-Beaulieu,  L'art  de  placer  et  gerer  aa  fortune,  Paris,  1906,  pp.  89, 
et  aeq. 


The  Kinds  and  Degrees  of  Income       143 

Further,  it  is  advisable  that  there  should  be  an  intelligent 
geographical  distribution  of  movable  property,  or  its  sub- 
division among  the  securities  of  different  countries,  since  this 
will  often  provide,  for  equal  safety,  a  notable  superiority  in 
the  income.  Thus,  in  the  Times  of  September  12th,  1904,  we 
are  told  that  of  two  equal  capitals,  one  of  which  is  invested 
exclusively  in  national  concerns,  whilst  the  other  is  invested 
without  any  regard  to  such  restrictions,  the  latter  furnishes, 
with  httle  less  security,  a  much  more  considerable  income.^ 
Always,  then,  we  find  that  uniformity  of  income  is  injurious, 
whereas  multiformity  is  profitable  ;  and  therefore  it  will  be 
readily  understood  that  with  the  general  diffusion  of  economic 
knowledge,  individual  income  tends  always  to  become  more 
multiform  and  differentiated. 

Moreover  the  proportions  in  which  individual  income  is 
subdivided  among  the  various  kinds  of  income  is  not  a 
matter  of  arbitrary  judgment  and  caprice ;  but  we  find  that 
these  proportions  are  regulated  by  strict  rules.  The  Talmud 
already  advises  the  investment  of  one-third  of  a  man's  property 
in  land,  one-third  in  movable  wealth,  and  one-third  in  loans. 
Without  yielding  to  the  trinitarian  superstition,  we  may 
recognise  that  there  is  here  a  reasonable  proportion,  which 
should  be  maintained  between  the  different  kinds  of  income 
in  order  to  secure  its  amount  and  its  stabiHty.  But  it  must  be 
added  that  this  rule  is  subject  to  continued  exceptions  and 
transgressions,  due  to  the  influence  of  national  character  and 
to  that  of  the  economic  system.  Thus,  in  France,  where  the 
inclination  to  industrial  investments  is  sUght  (probably 
because  the  birth-rate  is  low  and  famihes  are  small),  there  is 
less  general  desire  for  an  increase  in  individual  wealth,  and  on 
all  hands  there  is  less  disposition  to  run  the  hazards  of  in- 
dustrial speculation  in  order  to  obtain  a  greater  income  ;  hence 
a  large  proportion  of  individual  property  is  invested  in  the 
pubhc  funds,  and  above  all  in  foreign  securities,  since  the 
national  securities  are  insufficient ;  whereas  the  converse 
phenomenon  manifests  itself  in  countries  more  inclined  to 
industrial  investments.  Thus,  again,  in  periods  of  crisis,  many 
hasten  to  dispose  of  their  securities  in  order  to  buy  land,  or  to 
deposit  money  in  the  banks  ;  so  that  the  income  of  the  sellers 
^  E.  Catellani,  in  the  "  Rivista  di  Sociologia,"  1904 


144  T^^^^  Ecoiiornic  Synthesis 

of  securities  tends,  in  such  periods,  to  be  crystallised  in  the 
rent  of  lands,  whilst  the  income  of  the  buyers  of  these  securities 
is  crystallised  in  movable  values.  That  is  to  say,  the  crisis 
exercises  an  influence  towards  the  complete  separation  of  the 
individual  kinds  of  income,  tending  to  convert  incomes  from  a 
composite  into  a  uniform  condition. 

§  2.  Degrees  of  Income 

The  income  thus  multiform  in  character,  or  consisting  of  a 
number  of  heterogeneous  accruements,  is  received  by  indi- 
vidual owners  according  to  a  very  different  measure  or  in  very 
different  quantities.  Undoubtedly,  if  there  existed  the  free 
association  of  labour,  which  involves  the  complete  mutual 
interchangeability  of  the  producers,  there  would  be  excluded 
a  priori  any  divergence  of  individual  incomes  such  as  might 
arise  from  the  possession  of  more  efficient  means  of  production  ; 
for,  as  soon  as  any  such  difference  made  its  appearance,  the 
less-favoured  producers  would  hasten  to  transfer  themselves 
to  the  condition  of  the  others,  or  to  demand  an  equal 
share  in  the  better  means  of  production.  But  since,  on  the 
other  hand,  there  now  exists  the  coercive  association  of 
labour,  which  excludes  the  mutual  interchangeability  of  the 
producers,  the  possibihty  arises  that  certain  producers  may 
monopohse  the  more  efficient  means  of  production,  and  in 
this  way  obtain  a  larger  income. — And  this  possibiHty  be- 
comes a  necessity  as  soon  as  the  increase  in  the  population 
renders  it  no  longer  possible  that  cultivation  shall  be  limited 
to  land  of  maximum  fertiHty.  In  fact,  as  soon  as  it  becomes 
necessary  to  engage  in  the  simultaneous  cultivation  of  lands 
varying  in  productivity,  the  coercive  associations  of  labour 
which  are  producing  on  the  more  fertile  areas  of  land  obtain, 
for  the  same  quantity  of  capital  and  labour,  a  larger  product, 
and  therefore  a  higher  income,  than  those  on  the  less  fertile 
areas  can  secure  ;  and  in  this  way  there  come  into  existence 
different  zones  of  income,  corresponding  to  as  many  gradations 
in  the  productivity  or  efficiency  of  the  land,  or  of  the  other 
productive  elements  which  are  privately  owned  ;  that  is  to 
say,  there  is  created  a  number  more  or  less  considerable 
(according  as  is  larger  or  smaller  the  number  of  zones  of  land 
varying  in  fertility)  of  progressive  degrees  of  income,  so  that 


The  Kinds  and  Degrees  of  Income        145 

there  arises  income  of  the  first  degree,  consisting  of  the 
lowest  incomes,  that  is,  of  those  produced  on  the  less  fertile 
areas  of  land,  and  from  this  we  pass  to  income  of  the  second 
degree,  of  the  third  degree,  and  so  on.  But  the  entity  of  the 
respective  individual  incomes  of  one  and  the  same  degree  may 
vary,  either  owing  to  varying  capacity  on  the  part  of  the 
recipients  of  income  in  the  management  of  their  undertakings 
or  in  the  improvement  of  the  productive  process,  or  else  on 
account  of  their  varying  inchnation  to  save,  or  again  by  their 
varying  good  luck,  or  owing  to  the  annexation  more  or  less 
considerable  in  extent  which  they  succeed  in  effecting  of  the 
incomes  of  others,  and  so  on.  Thus,  the  varying  degrees  in  the 
fertihty  of  the  natural  elements  privately  owned,  determine 
the  various  degrees  of  income  ;  whereas  differences  in  capacity, 
or  in  individual  conditions,  subjective  or  objective,  determine 
the  divergences  of  the  individual  incomes  of  one  and  the 
same  degree. 

In  this  way,  after  the  total  income  has  been  subdivided  among 
its  various  species,  forming  as  many  heterogeneous  blocks, 
the  unities  of  product  which  constitute  the  various  blocks 
are  aggregated  into  a  series  of  other  groups  or  blocks  of  income, 
in  each  of  which  the  minimal  individual  income  exceeds,  by 
however  small  an  extent,  the  maximal  individual  income  of 
the  group  immediately  beneath  ;  whereas  the  various  indi- 
vidual incomes  collocated  in  each  group  present,  within  the 
limits  thus  assigned,  more  or  less  significant  differences.  Thus, 
subsequently  to  the  formation  of  kinds,  we  have  the  formation 
of  degrees  of  income  ;  or,  in  other  words,  to  the  segmentation  of 
income  in  the  vertical  sense,  there  succeeds  its  segmentation  in 
the  horizontal  sense.  And  since  this  formation  of  a  plurality 
of  degrees  of  income  originates  in  the  most  widely  generaHsed 
phenomenon  of  the  contemporaneous  cultivation  of  unequally 
productive  areas  of  land,  it  follows  that  it  must  manifest  itself 
whatever  may  be  the  form  of  income — ^provided  that  this  is 
founded  upon  the  coercive  association  of  labour — and  we 
therefore  find  it  in  undifferentiated  income  as  well  as  in  differ- 
entiated income. 

Given  a  series  of  incomes  of  increasing  degree,  the  average 
divergence  between  the  various  degrees  of  income  is  equal  to 
the  mean  of  the  divergences  of  the  respective  maximal  and 


146  The  Bcono7mc  Synthesis 

minimal  degrees  of  income  from  the  degree  of  the  average 
income. — Or  taking,  instead  of  the  two  extreme  incomes,  the 
upper  and  the  lower  quartile  (as  Galton  would  say),  that  is,  the 
meanj^ofjthe  incomes  [in  the  upper  and  the  lower  quarter, 
respectively,  of  the  scale-^the  average  divergence  among  the 
incomes  is  equal  to  the  mean  of  the  divergences  of  the  two 
quartiles  from  the  average  income  ;  whilst  the  maximum 
divergence  of  the  incomes  is  equal  to  the  difference  between 
the  income  of  maximum  and  that  of  minimum  degree. 

For  the  very  reason  that  the  income  of  a  given  degree  is  not 
a  precise  figure,  but  varies  between  two  limits  more  or  less 
remote,  the  mass  of  products  included  in  the  income  of  a  given 
degree  affords  us  per  se  no  absolute  information  as  to  the 
number  of  its  owners.  For  example,  if  the  income  of  the  first 
degree  ranges  from  1000  to  2000  francs,  and  I  know  that  the 
total  income  of  the  first  degree  amounts  to  100,000  francs, 
I  cannot  from  these  data  determine  the  number  of  the  recipi- 
ents of  income  of  the  said  degree,  since  this  number  may  be 
100,  or  50,  or  some  intermediate  figure.  For  the  same  reason, 
the  quantity  of  the  income  of  a  given  degree  gives  us  no 
information  as  to  the  average  individual  income  of  the  said 
degree,  since  this  is  further  determined  by  the  number  of  the 
recipients  of  income  ;  seeing  that  the  total  income  of  a  given 
degree  may  increase,  and  yet  the  average  individual  income 
of  the  same  degree  may  diminish,  if  there  occur  a  proportionate 
increase  in  the  number  of  the  recipients  of  income.  For  the 
same  reasons,  the  total  quantity  of  the  income  of  a  given 
degree  may  increase  or  diminish  without  any  change  in  the 
degree  of  the  income,  since  it  ma,y  happen  that  the  result  of 
the  change  in  the  total  quantity  may  simply  be  to  approximate 
the  individual  income,  or  a  part  of  the  individual  incomes, 
to  the  upper  or  the  lower  limit  of  the  incomes  of  that  degree  ; 
or  the  change  msij  be  accompanied  by  a  change  in  the  hke 
direction  in  the  number  of  the  recipients  of  income,  so  that 
the  measure  of  the  individual  incomes  undergoes  no  change. 
Thus,  to  follow  up  the  figures  previously  given,  if  the  total 
income  of  the  first  degree  increases  from  100,000  francs  to 
150,000  francs,  and  if  the  number  of  the  recipients  of  income 
remains  100,  the  individual  income  increases  from  1000  to 
1500  francs,  but  remains  always  income  of  the  first  degree  ; 


The  Kinds  and  Degrees  of  Income        147 

whilst  if  the  number  of  the  recipients  of  income  simultaneously 
increases  from  100  to  150,  the  individual  income  undergoes  no 
change  whatever.  In  any  case,  the  alteration  in  the  quantity  of 
income  under  consideration  does  not  in  any  way  affect  the 
degree  of  the  income. 

The  correlation  of  the  different  degrees  of  income  with  the 
varying  fertility  of  the  zones  of  land  simultaneously  cultivated, 
does  not,  however,  last  beyond  the  early  stages  of  economic 
evolution,  and  is  soon  annulled.  In  fact,  incomes  are  found 
to  be  disturbed  by  a  process  of  incessant  mutation,  it  may  be 
by  saving  or  wastage,  it  may  be  by  expansion  or  contraction 
to  the  detriment  or  to  the  advantage  of  other  incomes,  it  may 
be  by  chance  enrichment  or  impoverishment  ;  so  that  the 
incomes  of  each  degree  are  to  be  found,  after  a  certain  time, 
elevated  to  a  superior  or  depressed  to  an  inferior  degree.  Thus, 
after  a  shorter  or  a  longer  interval,  new  degrees  of  income  are 
formed,  which  have  no  longer  any  perceptible  connexion  with 
their  original  territorial  base,  but  present  themselves  simply 
as  the  resultant  of  all  the  multiplex  factors  of  individual  en- 
richment. 

But  these  manifold  reasons  tending  to  change  the  entity  of 
the  respective  individual  incomes,  inevitably  result  in  the 
increase  of  the  quantity  of  wealth  which  attaches  to  the  higher 
degrees  of  income.  If,  in  fact,  in  certain  forms  of  income, 
and  particularly  in  undifferentiated  income,  the  larger  income 
cannot  be  indefinitely  saved  to  a  larger  degree  ;  if  even  in 
differentiated  income  it  may  sometimes  happen  that  the  larger 
income  is  saved  to  a  lesser  extent  than  the  others  ;  it  is  none 
the  less  true  that  the  greater  income  definitely  increases  in  a 
greater  degree,  either  in  consequence  of  the  greater  produc- 
tivity which  it  impresses  upon  the  association  of  labour,  or  in 
consequence  of  the  greater  facility  it  possesses  for  the  annexa- 
tion of  rival  incomes  or  for  profiting  by  fortuitous  enrichments  ; 
and  therefore  the  portions  of  income  which  accrue  to  the 
incomes  of  higher  degree  increase  (determining  or  not,  as  the 
case  may  be,  an  elevation  in  the  degree  of  income),  whilst 
what  is  left  over  for  the  incomes  of  minor  degree  diminishes. 
In  other  words,  the  incomes  of  higher  degree  tend  to 
appropriate  to  themselves  the  greater  part  of  the  tota 
income. 


148  The  Economic  Synthesis 


§  3.  Mutual  Relationships  between  the  kinds  and 
Degrees  of  Income  and  the  Consequences  of 
these  Relationships 

Just  as  the  two  fundamental  forms  of  income  (undiffer- 
entiated and  differentiated),  and  of  subsistence  (onerous  or 
gratuitous)  which  is  the  complementary  term  of  these,  consti- 
tute the  base  of  the  four  fundamental  social  classes — so  also 
the  various  kinds  and  the  various  degrees  of  income  are  the 
base  of  as  many  sub-classes  into  which  is  subdivided  the 
substantially  unique  class  of  the  recipients  of  income. — ^There 
exists,  indeed,  a  series  of  sub-classes  upon  a  qualitative 
foundation,  distinguished  one  from  another  by  the  different 
kinds  of  income  owned  by  the  members  of  the  respective 
classes  (or,  it  would  be  better  to  say,  preponderantly  owned, 
since  we  have  seen  that  it  is  exceptional  for  income  to  be 
received  in  only  one  kind).  Such  are  the  sub-classes  of  land- 
owners, of  productive  capitahsts,  of  unproductive  capitahsts, 
and  unproductive  labourers,  etc.,  and  these  sub-classes  are  in 
their  turn  subdivided  into  owners  of  building  land,  of 
agricultural  estates,  of  mines,  into  capitalist  manufacturers, 
wholesale  traders,  retail  traders,  bankers,  speculators,  into 
professors,  lawyers,  dancing-masters,  etc.  On  the  other  side 
there  exists  a  series  of  sub-classes  upon  a  quantitative  founda- 
tion, distinguished  one  from  another  by  the  differing  entity  of 
the  income  in  the  case  of  the  various  recipients  ;  and  these  are 
the  sub-classes  of  the  minimal,  average,  high,  maximal,  etc., 
recipients  of  income. 

Two  incomes  may  be  of  the  same  degree  and  of  different 
forms,  or  conversely.  Thus,  for  example,  if  a  non-labourer  re- 
ceives an  income  equal  to  that  received  by  a  labourer,  the  two 
incomes  are  indeed  of  equal  degree,  but  differ  in  form,  for  the 
former  is  differentiated,  the  latter  undifferentiated.  Similarly, 
two  incomes  may  be  of  the  same  degree  and  of  different  kinds, 
or  conversely.  For  example,  if,  of  two  incomes,  each  of  1000 
francs,  one  is  derived  from  a  mine  and  the  other  from  a  filature, 
they  are  equal  in  degree,  but  of  different  kinds. — If  of  two 
incomes  from  landed  estate,  one  is  of  1000  francs  and  the 
other  of  10,000  francs,  they  are  of  identical  kind  but  differ 


The  Kinas  and  Degrees  of  Inco)ne        149 

in  degree.  There  is,  therefore,  no  necessary  connexion  between 
the  kind  of  income  and  the  degree.  Yet  it  is  none  the  less  true 
that,  among  the  forms,  the  kinds,  and  the  degrees  of  income, 
there  is  a  very  close  correlation,  in  so  far  as  the  incomes  of  a 
single  degree  tend  to  assume  the  same  form,  and  to  condense 
themselves  within  a  single  kind. — First  of  all  it  is  clearly 
manifest  that  an  income  of  minimal  degree  is  one  in  which  it  is 
impossible  for  the  recipient  of  income  to  withdraw  himself 
from  labour,  and  for  this  very  reason  minimal  incomes  neces- 
sarily present  themselves  in  the  form  of  undifferentiated  in- 
come.— Hence,  again,  the  influences  which  diminish  income,  or 
a  determinate  income,  increase  the  numerical  proportion  of  the 
owners  of  undifferentiated  income.  Thus,  in  recent  years,  in 
Er^land  and  in  America,  the  fall  in  the  price  of  grain,  and  the 
consequent  depression  of  the  income  from  landed  estates,  have 
effected  a  radical  change  in  the  landowner's  position  ;  the 
capitahst-owner  (gentleman  farmer)  has  more  and  more  been 
replaced  by  the  labourer-owner  (working  farmer).^  Conversely, 
an  income  of  high  degree  tends  to  take  the  form  of  differ- 
entiated income. — But  if,  in  this  respect,  the  degree  of  income 
influences  the  form,  it  is  no  less  true  that  the  form  of  income, 
in  its  turn,  influences  the  degree  ;  for  differentiated  income 
gives  rise  to  degrees  of  income  higher  than  those  which  prevail 
in  the  case  of  undifferentiated  income,  since  in  the  case  of  the 
latter  stricter  hmits  are  imposed  upon  the  increase  of  indi- 
vidual income. — ^Thus  the  higher  degrees  of  income  give  rise 
to  differentiated  income,  and  this  in  its  turn  gives  rise  to  yet 
higher  degrees  of  income. 

But  the  degree  of  income,  in  addition  to  determining  the 
form,  has  an  influence  also  in  determining  the  kind  of  income. 
— We  have  akeady  seen  that  in  undifferentiated  income 
certain  kinds  of  income  cannot  make  their  appearance  ;  now, 
inasmuch  as  income  of  minimal  degree  is  necessarily  un- 
differentiated, it  follows  that  such  income  cannot  manifest 
itself  in  certain  determinate  kinds.    On  the  other  hand,  income 

^  Levy,  Zur  Oeschichte  der  Agrarkrisen,  Jahrb.  fiir  N.E.,  1904,  p.  485. 
[The  English  terms,  "  gentleman  farmer  "  and  "  working  farmer,"  are  used 
by  the  German  author. — Translator.]. — Bourne  {Trade,  Popidation,  and 
Food,  London,  1880,  p.  263)  already  pointed  out  that  the  decline  of  income 
changed  the  standard  of  life  of  many  owners,  and  forced  them  to  choose 
a  trade  or  profession. 


150  The  Economic  Synthesis 

of  minor  degree  tends  predominantly  to  manifest  itself  as 
professional  income,  or  as  the  income  of  immaterial  labour, 
productive  or  unproductive.  This  is  true,  above  all,  of 
minimal  income.  It  often  happens,  in  fact,  that  the  earnings 
(including  income)  of  independent  artisans  or  independent 
producers  are  inferior  to  those  of  employees  ;  as  occurs  in 
Austria,  where  the  majority  of  independent  artisans  earn  from 
1200  to  1300  krones,  whilst  the  majority  of  employees  receive 
from  2000  to  2400  krones. ^  Now,  in  consequence  of  this,  there 
are  always  many  minor  recipients  of  income  who  renounce  the 
idea  of  founding  an  independent  enterprise,  or  who  abandon 
an  enterprise  the}^  have  already  begun,  in  order  to  seek  employ- 
ment as  managers  or  subordinates  in  a  capitalist  undertaking  ; 
whence  their  income,  which  has  hitherto  been  an  attribute  of 
capital  and  productive  labour,  now  becomes  the  remuneration 
of  immaterial  labour.  Thus  the  lowest  class  of  the  recipients 
of  income  tends  always  more  and  more  to  become  constituted 
of  two  dissimilar  fragments,  one  of  which,  made  up  of  the 
minor  industrials  (handloom  weavers  and  other  independent 
artisans)  and  small  proprietors,  has  undifferentiated  income 
and  is  independent,  whilst  the  other  class,  made  up  of 
employees  and  agents,  is  dependent ;  and  the  interests  of  these 
two  classes,  being  in  many  respects  antagonistic,  give  rise  to 
enduring  conflicts.  The  increasing  numerical  and  economic 
prevalence  of  the  dependent  recipients  of  income  necessarily 
leads  to  an  increase  in  the  economic  and  political  power  of  the 
major  recipients  of  income,  or  to  the  predominance  of  these 
over  the  lower  and  middle  strata  of  society.  ^ 

Moreover,  when  from  income  of  minimal  degree  (un- 
differentiated income,  or  income  quantitatively  comparable  to 
undifferentiated  income)  we  pass  upwards  to  incomes  of 
higher  degree,  usually  differentiated,  we  find  that  in  the  more 
modest  spheres  of  such  incomes  professional  income  prevails, 
whilst  in  the  case  of  still  higher  incomes,  those  from  capitalised 
property  predominate.  When,  in  the  year  1680,  Charles  XI 
of  Sweden  effects  a  forcible  reduction  in  the  landed  property 
of  the  nobles,  these  latter  immediately  enter  the  employment 

1  Leiter,  Die,  Verteilung  des  Einkommens  in  Oesterreich,  Vienna,  1907,  p. 
234. 

*  Potthof,  La  Situation  actuelle  de  la  clasae  inoyenne  en  Allemagne,  "  Revue 
Ec.  Intern,"  November,  1904. 


The  Kinds  and  Degrees  of  Income        1 5 1 

of  the  State. — But  this  is  simply  one  manifestation  of  a 
universal  phenomenon  ;  for  always  and  everywhere  those  who 
receive  incomes  from  capitaHsed  property  are  compelled,  when 
these  incomes  are  insufficient,  to  add  to  them  by  professional 
labour  ;  whence  it  happens  that  professional  income  comes  to 
represent  a  considerable  fraction  of  their  total  income,  it  may 
be  in  consequence  of  the  scantiness  of  their  income  from 
capitaHsed  property,  or  it  may  be  from  the  great  increase  they 
are  able  to  effect  in  their  income  by  professional  labour.  Con- 
versely, in  proportion  as  we  ascend  to  the  higher  degrees  of 
income,  the  larger  is  the  entity  of  the  income  from  capitaHsed 
property,  and  the  rarer  becomes  the  exercise  of  professional 
labour  on  the  part  of  the  recipient  of  income  ;  and  hence  it 
happens  for  a  twofold  reason  that  professional  income  comes 
to  represent  a  lesser  percentage  of  the  total  individual  income. 
This  explains  the  well-known  statistical  fact  that  income  does 
not  increase  proportionately  to  the  increase  in  capitaHsed 
property,  simply  because  the  higher  incomes  are  not  swelled 
by  the  confluence  of  the  professional  incomes. 

With  the  fuUer  development  of  economic  relationships,  these 
phenomena  tends  always  to  become  more  conspicuous.  We 
have  seen,  in  fact,  that  certain  kinds  of  income  tend,  as 
economic  progress  continues,  to  a  fatal  decHne  ;  we  shall  see 
in  the  next  chapter  that  each  form  of  income  traverses,  towards 
its  close,  a  descendent  phase,  in  which  the  total  income 
diminishes  ;  and  we  shall  see  in  Chapter  VI  that  other 
influences  combine  to  diminish  individual  incomes  or  a  part  of 
these.  Now  the  owners  of  diminishing  incomes  are  constrained, 
sooner  or  later,  to  make  up  for  the  decHne  in  their  income  from 
capitaHsed  property  by  the  practice  of  one  of  the  Hberal  pro- 
fessions, so  that  their  income,  which  has  hitherto  been  ex- 
clusively derived  from  capitaHsed  property,  now  becomes 
composite  in  character  from  the  admixture  of  a  professional 
element.  Income,  therefore,  tends  more  and  more  from  the 
simple  to  the  complex  in  type,  so  that  there  is  a  continual 
increase  in  the  number  of  complex  incomes,  and  a  cor- 
relative reduction  in  the  number  of  incomes  derived  solely 
from  capitalised  property.  Thus,  in  Italy,  the  heads  of 
families  Hving  exclusively  upon  independent  means,  who 
numbered    886,954  in   the   year    1881,   were   no   more   than 


152  The  Economic  Synthesis 

511,279  in  the  year  1901.^  Further,  as  the  decline  of  the  lesser 
incomes  proceeds,  the  element  in  these  incomes  derived  from 
capitalised  property  continues  to  decrease  in  importance  in 
proportion  to  the  professional  element,  until  the  latter  becomes 
almost  exclusively  dominant.  In  Prussia,  for  example,  the 
greater  incomes  tend  always  to  become  more  and  more  incomes 
from  capitahsed  property,  whilst  the  lesser  incomes,  those 
from  900  to  9500  marks  become  more  and  more  incomes 
purely  professional  in  character  ;  indeed,  the  statistics  of  that 
country  show  further  that  the  ratio  between  the  number  of 
those  affected  by  property  tax  and  by  income  tax,  respec- 
tively, decreases  among  the  lesser  recipients  of  income,  and 
increases  among  the  greater  recipients  of  income. 

Leaving  professional  income  out  of  the  question,  and  turn- 
ing our  attention  to  the  income  from  capitalised  property 
alone,  we  can  readily  show  that  the  subdivision  of  this  income 
into  various  kinds,  and  the  proportions  of  such  subdivision, 
are  strictly  correlated  with  the  degree  of  income.  In  fact, 
a  wise  proportion  among  the  various  kinds  of  income  can  be 
maintained  only  by  means  of  a  comphcated  and  diligent  work 
of  administration,  which  is  sometimes  effected  by  the  recipient 
of  income  in  person,  but  is  more  often  entrusted  to  a  paid 
agent.  Now,  if  the  recipient  of  income  does  not  possess  the 
capacity  for  the  discharge  of  this  deHcate  function,  or  if  he 
lacks  the  necessary  time,  and  if  he  is  not  sufficiently  wealthy 
to  pay  someone  else  to  do  the  work  for  him,  his  income  will 
not  be  administered  according  to  the  proper  rules,  and  will  no 
longer  maintain  the  due  proportion  among  the  various  kinds. 
It  may  even  happen  that  the  narrow  hmits  of  the  income 
ultimately  force  the  owner  to  condense  it  upon  a  single  kind, 
and  this  renders  necessary  a  far  more  watchful  scrutiny  to 
guard  against  loss. 

Whilst,  therefore,  the  supplement  of  income  from  capitalised 
property  by  professional  income  is  dependent  upon  the  in- 
sufficiency of  the  former,  the  subdivision  of  the  income  from 
capitalised  property  is  due  to  the  magnitude  of  such  income 
and  is  proportional  to  such  magnitude.  This  is  why  it  is  that 
in  Austria  46%  of  the  earned  incomes  derived  from  the  conduct 
of  banking  business,  incomes  already  fairly  high,  rise,  thanks 
^  Censimento  della  populazione,  1901,  p.  cvi. 


The  Kinds  and  Degrees  of  Income        153 

to  subsidiary  income  from  capitalised  property,  into  a  higher 
sphere  of  income  ;  whilst  no  more  than  25%  of  the  earned 
incomes  of  minimal  degree  rise,  thanks  to  subsidiary  income 
from  capitalised  property,  to  a  higher  degree  of  income.^  If 
we  compare  different  countries,  we  find  that  those  in  which 
the  average  income  is  comparatively  high  present  more  com- 
plex and  multiform  incomes. 

But  the  degree  of  income,  in  addition  to  determining  the 
proportions  of  its  distribution  among  the  incomes  of  various 
kinds,  determines  also  the  manner  of  distribution,  or  the  kinds 
of  income  to  which  it  is  chiefly  allotted.  Just  as  the  owner  of 
a  moderately  large  income  withdraws  himself  from  professional 
labour,  and  thus  comes  to  have  an  income  derived  solely  from 
capitahsed  property,  so  the  owner  of  a  more  considerable 
income  withdraws  himself  from  the  troubles  of  business  and 
from  association  with  mercantile  affairs,  in  order  to  concentrate 
upon  kinds  of  income  which  are  more  regular  and  more  stable. 
Hence  the  incomes  of  a  higher  degree  derived  from  capitalised 
property,  originally  received  in  the  form  of  agricultural  or 
industrial  incomes,  tend  sooner  or  later  to  become  transformed 
into  consolidated  incomes,  abandoning  the  fluctuating  kinds 
of  income  to  the  incomes  of  lower  degree  ;  or,  in  other  words, 
the  major  incomes  become  massed  in  urban  rents,  or  in  the 
interest  of  the  safer  pubUc  securities  (whence  the  prevalence 
of  movable  wealth  in  the  case  of  the  larger  capitahsed  pro- 
perties), whilst  the  minor  and  medium  incomes  are  mainly 
drawn  from  agriculture,  manufacture,  or  commerce. 

This  conclusion  receives  notable  support  from  the  association 
of  two  facts  previously  recorded.  We  saw  that  the  mass  of 
total  income  tends  to  become  condensed  in  increasing  pro- 
portions in  urban  rent  and  in  the  interest  of  the  more  secure 
kinds  of  unproductive  capital — that  is  to  say,  in  the  two 
principal  kinds  of  consolidated  income  ;  and  we  have  also  seen 
that  the  mass  of  total  income  tends  to  become  condensed  in 
increasing  proportions  in  the  superior  degrees  of  income. 
Now  the  simultaneous  increase  of  the  mass  of  wealth  condensed 
in  the  species  of  consolidated  income  and  in  the  higher  degrees 

^  Philippovich,  Das  Einkommen  nach  dem  Berufe  und  nach  der  Stellung 
im  Berufe  in  Oesterreich,  "  Zeitschrift  fiir  Volkswirtschaft,"  1906,  pp.  476^ 
et  seq. 


154  The  Economic  Synthesis 

of  income  gives  good  ground  for  the  assumption  that  these 
kinds  of  income  nourish  in  particular  the  more  elevated 
degrees  of  income. ^  In  fact,  the  truth  of  this  affirmation  is 
demonstrable  by  definite  statistical  data  ;  hence,  while  the 
incomes  of  minor  degree  are,  above  all,  fluctuating  incomes, 
the  incomes  of  major  degree  are,  above  all,  consolidated 
incomes.  2 

It  foUows  from  this  that  whereas  the  quantity  of  the  various 
consoHdated  and  fluctuating  incomes  produced  in  each  nation 
is  determined  by  the  quantity  of  capital  productively  em- 
ployed, by  the  quantity  and  productivity  of  the  land,  by  the 
quantity  of  public  or  private  securities  issued  ;  the  quantity 
of  the  various  consohdated  and  fluctuating  incomes  received 
by  each  nation  is,  on  the  other  hand,  determined  exclusively 
by  the  distribution  of  its  total  income  among  the  recipients 
of  income  of  various  degrees.  For  the  nations  in  which  the 
larger  incomes  prevail  tend  to  concentrate  to  themselves  a 
larger  quantity  of  consohdated  incomes,  that  is  to  say,  to 
exchange  a  part  of  their  own  fluctuating  incomes  for  the 
consohdated  incomes  of  those  nations  in  which  incomes  of 
medium  size  prevail.  Holland  in  the  eighteenth  centur}^ 
whose  citizens  are  to  a  large  extent  supported,  not  by  foreign 
trade,  but  by  the  interest  upon  the  public  debt  of  foreign 
countries,  furnishes  us  with  a  typical  example  of  a  country 
with  concentrated  wealth  which  exchanges  a  part  of  its  own 

^  It  cannot  indeed  be  said  that  such  is  in  every  case  a  necessary  sequence. 
In  fact,  let  us  suppose  that  the  rent  from  landed  property  is  received  especially 
by  the  lower  degrees,  and  profit  by  the  higher  degrees,  of  income.  If  the  mass 
of  income  constituting  rent  increases,  while  the  mass  of  income  constituting 
profit  remains  constant  but  the  number  of  the  recipients  of  this  latter  dimin- 
ishes, the  individual  income  of  the  capitalists  increases,  and  may  eventually 
rise  to  a  higher  degree  of  income.  Hence,  in  such  conditions,  the  mass  of 
w^ealth  received  in  the  higher  degrees  of  income  increases  although  there  has 
not  been  any  definite  increase  in  the  mass  of  wealth  received  in  the  kinds  of 
income  constituting  the  superior  incomes,  whilst  there  has,  on  the  other  hand, 
been  an  increase  in  the  kinds  constituting  the  inferior  incomes.  But  this 
depends  upon  the  neutralising  factor  of  the  diminution  in  the  number  of  the 
recipients  of  the  greater  income.  If  we  put  this  fact  aside,  we  find  that  the 
increase  in  the  wealth  received  in  one  given  kind  of  income  increases  the  mass 
of  wealth  received  in  the  degree  of  income  constituted  by  that  kind,  and  that 
therefore  the  simultaneous  increase  in  the  mass  of  wealth  agglomerated  in 
the  incomes  of  a  given  kind  and  of  a  given  degree,  shows  that  this  degree  is 
constituted  out  of  that  kind. 

*  This  result  may,  however,  be  affected  by  peculiarities  of  national  char- 
acter. In  France,  for  example,  the  minor  recipients  of  income  gladly  invest 
in  French  national  securities,  which  are  pre-eminently  consolidated  income. 


The  Kinds  and  Degrees  of  Income        1 55 

fluctuating  income  for  the  consolidated  income  of  countries 
with  diffused  wealth,  and  thus  comes  to  concentrate  in  its  own 
possession  a  mass  of  consoHdated  income  exceeding  that 
which  is  directly  produced  within  its  own  frontiers.  ^ 

The  kind  and  the  degree  of  income  whose  mutual  relation- 
ships have  thus  been  traced,  affect  in  addition  the  species  of 
consumption,  or  the  object  upon  which  income  is  actually 
employed.  In  fact,  the  income  of  the  unproductive  labourers 
must  be  devoted  to  saving  in  a  larger  proportion  than  the 
income  of  the  owners  of  property,  owing  to  the  special  need 
which  presses  upon  the  unproductive  labourers  of  providing  a 
capital  which  they  can  hand  on  to  their  children.  Moreover, 
while  the  rent  of  land  is,  as  a  rule,  chiefly  devoted  to  unproduc- 
tive consumption,  profit,  on  the  other  hand,  is  chiefly  devoted 
to  saving.  Hence  there  arises  a  different  method  of  consump- 
tion of  income,  imposed  upon  income  by  differences  in  kind. 
Incomes  of  differing  degrees  are  also  consumed  in  different 
ways.  Incomes  of  minor  degree  must  be  devoted  to  insurance 
in  a  more  notable  measure,  either  because,  as  we  have  seen, 
they  cannot  have  recourse  to  the  more  efficient  method  of 
self-insurance  by  means  of  distribution  among  several  species 
of  income,  or  else  because,  for  the  very  reason  of  their  inferi- 
ority, they  are  more  subject  to  oscillations  and  losses.  For 
example,  in  Germany  it  has  been  estabhshed  that  the  harvest 
is  more  constant  where  culture  is  more  intensive  and  where 
the  yield  per  acre  is  greater,  precisely,  that  is  to  say,  where  the 
farms  are  larger. ^  But  this  is  not  all;  for  the  incomes  of 
minor  degree  must  in  addition  be  devoted  to  an  increasing 
extent  to  buying  the  services  of  unproductive  capital  and 
unproductive  labour.  Thus,  for  example,  it  has  been  observed 
that  the  cost  of  housing,  that  is  to  say  the  mass  of  income 
which  is  consumed  in  payment  for  house-rent,  increases  by 
no  means  proportionately  to  the  increase  in  income  ;  and, 
moreover,  that  when  we  reach  a  certain  point,  this  cost  re- 
mains constant  notwithstanding  a  considerable  increase  in  the 
amount  of  income.  Thus  the  proportion  of  income  which  is 
expended  upon  house-rent  diminishes  as  the  degree  of  income 

^  Sartorius  von  Waltershausen,  Das  volksvnrtschaftliche  System  der 
Kapitalanlage  im  Auslande,  Berlin,  1907,  pp.  367,  et  seq. 

"  A.  Mitscherlich,  Die  Schwankungen  der  landivirtschaftlichen  Reinertrdge, 
Tubingen,  1903. 


156  The  Economic  Synthesis 

increases.  From  the  Silesian  weaver,  who  spends  upon  rent 
70%  of  his  wages,  ^  to  the  wealthy  man,  who  spends  thereon 
at  most  25%  of  his  income,  the  proportion  of  the  individual 
income  which  is  spent  upon  housing  forms  a  decreasing  scale  *  ; 
and  with  economic  progress  the  ratio  between  the  pro- 
portion of  the  minor  incomes  spent  upon  rent  and  the  propor- 
tion of  the  major  incomes  similarly  expended  tends  continually 
to  increase.  Again,  medical  services  are  far  more  often 
required  by  the  families  of  the  less  well-to-do  than  by  those  of 
the  rich,  who  Hve  under  more  hygienic  conditions  and  are 
therefore  better  safeguarded  against  disease  ;  thus,  it  was 
cynically  remarked  by  an  Austrian  governor  that  cholera 
never  visits  the  houses  of  the  well-to-do,  and  the  same  may 
be  said  of  other  serious  and  deadly  diseases.  Even  the  cost 
of  education  is  often  less  for  the  families  of  those  who  are 
comparatively  well-to-do,  among  whom  the  parents,  being 
themselves  possessed  of  some  degree  of  culture,  can  impart  to 
their  children  the  rudiments  of  knowledge,  thus  to  some 
extent  escaping  the  payment  of  tribute  to  the  unproductive 
labourers.  It  may,  indeed,  be  affirmed  that  the  fraction  of 
income  expended  in  payment  for  the  services  of  unproductive 
capital  and  unproductive  labour  becomes  greater  in  pro- 
portion as  the  degree  of  income  becomes  less,^  and  that  in  the 
lower  degrees  of  income,  it  tends  to  exceed  the  fraction  spent 
upon  products.  This  is  immediately  evident  when  we  study 
the  subsistence  of  the  labourer,  which  is  spent  in  larger  pro- 
portion upon  services  than  upon  products  ;  and  the  Fabian 
Society  calculates  that  the  English  workers,  while  they  con- 
sume 33%  of  the  value  of  the  total  products  of  the  country, 

^  Mombert,  Das  Ndhrungswesen,  Jena,  1904,  p.  4.  For  additional  data, 
referring  to  England,  consult  Higgs,  Workmen's  Budgets,  "  Journal  Stat.  Soc," 
1893,  pp.  281-3. 

2  Seligman,  Principles,  p.  485  ;  Pohle,  Die  Entwickelung  des  V erhdltnissea 
zwischen  Einkommen  und  Miethe,  "  Zeitschrift  fiir  Volkswirtschaft,"  1905, 
p.  26. — See  also,  for  further  developments,  Bresciani,  II  rapporto  fra  pigione  e 
reddito  secondo  alcune  recenti  statistiche,  "  Giornale  degli  Economisti,"  Julj^ 
1906. 

*  In  truth  the  remuneration  of  unproductive  labour  is  sometimes  pro- 
portional to  the  entity  of  the  income  by  which  the  payment  is  made.  Thus, 
in  the  year  1863,  in  the  city  of  Glasgow,  an  elected  medical  committee  estab- 
lished a  scale  of  fees  proportional  to  the  wealth  of  the  patients.  But  even 
when  this  takes  place  (and  such  cases  are  in  fact  sufficiently  rare),  it  always 
remains  true  that  the  total  fraction  of  an  income  of  minor  degree  transferred 
to  unproductive  labour  is  greater,  owing  to  the  larger  quantity  of  unpro- 
ductive labour  which  the  recipient  of  such  an  income  is  forced  to  buy 


The  Kinds  and  Degrees  of  Income        157 

consume  40%  of  the  value  of  the  total  services.  The  same 
result  would  be  obtained  by  the  comparison  of  incomes  quanti- 
tatively diverse  ;  from  which  we  may  conclude  that  the 
inferiority  of  the  real  income  in  proportion  to  the  apparent 
income  becomes  more  marked  according  as  the  degree  of 
income  decreases. 

§  4.  Influence  of  the  preceding  Phenomena 
UPON  Taxation 

We  have  seen  that  the  total  income  is  subdivided  into  a 
number  of  different  kinds,  consisting  of  the  incomes  from 
land,  from  productive  or  unproductive  capital,  and  from 
material  or  immaterial  labour,  productive  or  unproductive. 
But  among  the  various  kinds  of  unproductive  labour  which 
participate  in  income,  there  is  one  whose  participation  in  the 
total  income  is  of  especial  importance  and  gives  rise  to  pecuUar 
complications,  namely,  the  unproductive  labour  exercised 
and  represented  by  the  state.  It  is  by  the  taxation  of  income 
that  the  participation  of  the  state  in  the  total  income  is 
secured.  The  possibihty  is,  of  course,  not  excluded  that 
the  state  may  procure  in  addition  a  part  of  its  revenue 
at  the  cost  of  subsistence,  and  this  usually  happens  where 
subsistence  is  not  reduced  to  the  barest  necessaries  of 
life  ;  in  such  cases  we  have  an  expansion  of  income  at  the 
expense  of  subsistence,  that  is  to  say,  a  conversion  of  a  portion 
of  subsistence  into  the  income  of  unproductive  labour.  Limit- 
ing our  consideration  here,  however,  to  the  levies  made  by 
the  state  upon  income,  we  may  point  out  that  income  may 
be  affected  by  three  kinds  of  taxes,  which  constitute  as 
many  progressive  phases  of  the  evolution  of  taxation  :  taxes 
upon  the  commodities  of  which  income  is  made  up  ;  taxes 
upon  net-produce  ;  and  income  tax. 

A  tax  which  falls  upon  the  producers  of  the  commodities  in 
which  income  is  consumed  is  necessarily  transferred  to  the 
recipients  of  income  who  buy  these  commodities,  and  thus 
ultimately  resolves  itself  into  a  tax  upon  income.  But  in 
order  that  such  a  tax  may  take  the  form  of  a  general  tax  levied 
upon  incomes  "pro  rata,  it  is  necessary  that  it  should  apply  to 
all  the  products  of  consumption  of  the  recipients  of  income 
in  exact  proportion  to  their  value  ;  for  otherwise  the  result 


158  The  Econo7nic  Synthesis 

will  be  a  total  or  partial  exemption  of  those  incomes  which  are 
employed  in  the  consumption  of  products  escaping  taxation, 
or  of  products  less  heavily  taxed  than  others. 

These  considerations  apply  to  the  simplest  hypothesis,  that 
income  is  actually  consumed  in  products  different  from  those 
in  which  subsistence  is  consumed.  But  in  view  of  the  fact  that 
certain  commodities  form  part  alike  of  income  and  of  sub- 
sistence, if  we  do  not  wish  that  the  tax  should  fall  also  upon 
subsistence,  it  will  be  proper  to  exempt  these  special  com- 
modities from  the  ad  valorem  tax  which  is  imposed  upon  the 
other  commodities  of  consumption.  But  if  these  commodities 
are  consumed  by  the  various  recipients  of  income  to  an  equal 
extent,  or,  at  least,  to  an  extent  which  is  not  proportional  to  the 
entity  of  their  incomes,  the  exemption  of  these  commodities 
from  the  tax  gives  an  advantage  to  the  minor  recipients  of 
income,  because  a  larger  proportion  of  their  income  is  exempt 
from  taxation.  Thence  arises  the  necessity  to  compensate 
the  recipients  of  the  larger  incomes  by  the  slighter  taxation  of 
the  commodities  especially  consumed  by  these — a  measure 
involving  calculations  of  a  complex  character  and  which  it  is 
not  always  possible  to  carry  out.  Finally,  even  where  all  these 
conditions  are  respected,  such  a  tax  has  always  the  very  grave 
defect  of  affecting  income  by  indirect  means,  creating  and 
generalising  undesirable  processes  of  repercussion. 

A  proportional  tax  upon  net-produce  is  levied  upon  the 
total  income  as  ascertained  by  the  real  or  objective  method  of 
determination  previously  considered,  and  is  levied  upon  the 
persons  of  those  who  immediately  receive  it,  the  owners  of  the 
productive  elements  ;  but  such  a  tax  does  not  take  into 
account  the  subsequent  transference  of  part  of  the  income  of 
these  to  unproductive  capitalists  and  unproductive  labourers. 
If  there  is  free  competition  among  the  various  recipients  of 
income,  the  owners  of  the  productive  elements  are  able  to 
transfer  a  part  of  the  tax  levied  upon  them  to  the  unproductive 
capitalists  and  unproductive  labourers,  thus  effecting  a  cor- 
responding reduction  in  the  share  of  income  the  former  have  to 
transfer  to  the  latter  in  return  for  the  activities  rendered  by 
these,  or,  in  other  words,  thus  diminishing  the  interest  of 
unproductive  capital  and  the  remuneration  of  unproductive 
labour. — ^If,  however,  the  owners  of  the  unproductive  elements 


The  Kinds  and  Degrees  of  Income        159 

have  a  monopoly,  and  have  not  hitherto  made  the  fullest 
possible  use  of  the  power  this  gives  them,  the  owners  of  the 
productive  elements  are  unable  to  pass  on  the  tax  to  the 
owners  of  the  unproductive  elements,  and  these  latter  there- 
fore profit  by  an  undeserved  immunity  from  taxation.  Thus 
the  tax  upon  net-produce  may  give  rise  to  unjust  exemptions  ; 
and  in  any  case  such  a  tax  exhibits,  though  to  a  less  marked 
degree,  the  same  vice  as  the  one  last  considered — ^namely,  that 
it  renders  repercussion  inevitable. 

As  long,  however,  as  the  various  incomes  are  uniform  in 
kind  and  in  degree,  or  as  long,  at  any  rate,  as  the  individual 
differences  are  inconsiderable,  taxes  upon  the  products  of 
consumption  of  the  recipients  of  income  and  taxes  upon  net- 
produce,  notwithstanding  their  intrinsic  vices,  may  be  levied 
without  doing  serious  harm. 

But  when  income  is  subdivided  into  a  greater  number  of 
kinds,  and  when  the  amount  accrueing  to  the  individual 
recipients  varies  more  considerably,  indirect  taxes  and  real 
direct  taxes  show  themselves  ill-adapted  to  affect  the  indi- 
vidual fractions  of  the  total  income  in  just  measure  and  with 
the  necessary  precision,  and  the  imposition  becomes  inevitable 
of  a  specific  tax  essentially  personal  in  character,  one  which 
follows  income  itself  through  aU  the  meanders  of  its  distribu- 
tion, affecting  the  sub-species  and  subdivisions  of  income 
in  the  hands  of  its  ultimate  recipients.  In  other  words,  the 
differentiation  of  the  kinds  and  of  the  degrees  of  income, 
generates  nper  se  the  need  for  an  income  tax,  which  is,  moreover, 
preferable  to  any  other  mode  of  taxation,  in  that  it  exclusively 
affects  the  individual  tax  payer,  without  giving  rise  to  re- 
percussions properly  so-called. — ^Now,  since  income  tax  is  a 
product  of  the  differentiation  of  income,  it  makes  its  first 
appearance  in  countries  whose  economic  development  is 
advanced,  and  where  the  differentiation  of  income  has  become 
considerable  and  acute  ;  and  this  is  why  we  find  that  whereas 
in  England  and  in  Prussia  the  income  tax  has  now  long  been 
in  force,  in  Russia  it  is  only  in  our  own  day  that  proposals  to 
impose  such  a  tax  have  been  put  forward,^  and  why  the 

^  OzerofE  [Economic  Russia  and  her  Financial  Policy],  Moscow,  1905, 
p.  259.  The  Government  has  announced  to  the  Duma  its  intention  to  intro- 
duce a  project  for  the  progressive  taxation  of  income. 


i6o  The  Econoinic  Synthesis 

income  tax  forcibly  introduced  by  the  English  Government 
into  India  in  the  year  1886  was  accompanied  by  exemptions 
and  transformations  which  made  it  altogether  atypical. 

But  with  this  problem  there  arise  the  means  for  its 
solution  ;  for  economic  evolution,  while  creating  the  need 
for  levying  a  specific  tax  upon  income,  creates  at  the  same 
time  the  possibiHty  of  a  book-keeping  determination  of 
income,  and  therewith  for  the  first  time  renders  such  a  tax 
possible.  If,  in  fact,  the  insuperable  obstacles  which,  as  we  have 
seen,  so  long  faced  attempts  at  the  determination  of  income 
rendered  it  necessary  to  levy  taxes  on  capitalised  property,  not 
only  in  the  case  of  personal  property,  but  also  in  the  case  of 
the  so-called  income  taxes  which  were  established  in  England 
from  the  fifteenth  to  the  seventeenth  centuries — in  the 
eighteenth  century,  these  difficulties  of  book-keeping  at  length 
yielded  before  the  progress  of  that  science,  and  it  then  became 
possible  to  institute  an  income  tax  properly  so-called.  But 
the  determination  of  income,  even  when  this  becomes  feasible, 
presents  considerable  difficulties,  which  were  pointed  out  in 
Chapter  II.  In  a  country  such  as  France,  in  which  the  income 
tax  has  not  yet  been  instituted,  the  recipients  of  income,  who 
are  naturally  averse  to  such  a  tax,  are  never  tired  of  laying 
stress  upon  these  difficulties,  and  of  declaring  them  to  be 
insuperable  ;  whereas,  in  those  countries  such  as  England, 
where  the  income  tax  is  an  estabHshed  institution,  the 
technical  difficulty  of  the  determination  of  income  gives  rise 
to  increasing  conflicts  between  the  recipients  of  income  and 
the  revenue  authorities,  the  former  being  careful  to  declare 
their  incomes  as  low  as  possible,  while  the  desire  of  the  latter 
is  to  exaggerate  the  amount  of  incomes.  Hence  arise,  on  the 
one  hand,  the  partial  concealment  of  income,  as  is  proved  by 
the  anonymous  payments  of  income  tax  previously  withheld 
by  fraud  [conscience  money],  and  on  the  other  hand  the  serious 
inequahties  which  vitiate  aU  systems  of  taxation,  however  well 
designed,  and  however  nearly  approaching  perfection. 

The  material  difficulties  which  surround  the  appHcation  of 
income  tax  render  it  more  than  ever  pressing  to  establish  with 
precision  the  characteristics  and  the  rules  of  income  tax,  to 
determine  its  subject,  its  object,  and  its  method  of  rational 
application. 


The  Kinds  and  Degrees  of  Income        i6i 

Since  income  is  an  essentially  individual  attribute,  a  tax 
upon  income  should  be  directly  applicable  to  the  individual 
who  receives  that  income  ;  in  other  words,  it  is  the  individual 
alone  who  should  be  subjected  to  income  tax.  It  follows  from 
this  that  in  a  rational  system  of  taxation,  the  earnings  of  a 
limited  company  or  of  a  co-operative  society,  which  go  to 
augment  individual  income,  ought  to  be  taxed  through  the 
individual  shareholders  or  members  who  receive  such  income, 
and  that  these  earnings  should  not  be  taxed  while  in  the 
hands  of  the  society  which  collects  and  distributes  them.^  It 
may  be  admitted  that,  for  convenience  in  raising  the  tax 
thus  imposed  upon  the  dividends  of  the  members  or  share- 
holders, payment  may  very  well  be  asked  from  the  society  ; 
but  it  must  be  understood  that  in  such  cases  these  dividends 
can  no  longer  be  included  in  the  calculation  of  the  taxable 
income  of  the  members  or  shareholders  without  giving  rise  to 
the  injustice  of  a  double  taxation. 

As  far  as  concerns  the  object  upon  which  income  tax  is 
imposed,  it  is  hardly  necessary  to  point  out  that  there  are 
excluded  from  it  all  those  elements  which  do  not  form  part  of 
income  itself.  Hence  all  the  immaterial  enjoyments  deriving 
from  income,  which,  as  we  have  seen,  are  not  income,  ought  to 
be  excluded  from  the  operations  of  the  tax.  With  justice, 
therefore,  the  Prussian  Income  Tax  Law  of  June  24th,  1891, 
the  Austrian  Law  of  October  25th,  1896,  and  others,  exclude 
from  taxation  "enjoyments  deriving  from  permanent  con- 
sumable wealth."  By  parity  of  reasoning,  income  tax  should 
not  apply  to  those  accruements,  or  realisations  of  capitalised 
property,  which  lack  the  essential  character  of  income,  namely 
periodicity ;  such,  for  example,  as  the  entrance-fee  to  a  club, 
the  fines  levied  by  a  club  upon  its  members,  or  fines  imposed 
by  an  employer  on  his  workmen.  Thus,  again,  if  an  entre- 
preneur sell  to  others  a  machine,  a  building,  a  plant,  an  area 
of  land,  or  a  security,  or  if,  retiring  from  business,  he  sells  to 
his  successor  his  good-wiU  or  his  practice,  the  price  he  receives 
for  this  sale  is  not  income,  and  it  must  therefore  be  exempt 
from  income  tax  ;   it  is  merely  a  realisation  of  capital,  which 

*  Biermer,  Die  Mittelstandbewegung  und  das  Warenhaiisproblem,  Giessen, 
1905,  pp.  65,  et  seq.  (Biermer  quotes  also  from  Fuisting,  Qrundziige  der  Steuer- 
lehre,  Berlin,  1902). 


1 62  The  Economic  Synthesis 

can  and  should  pay  income  tax  only  upon  the  accruements 
which  it  may  subsequently  yield. ^  Hence  the  Prussian  and 
Austrian  laws  just  mentioned,  whilst  worthy  of  approval  in 
so  far  as  they  exempt  from  income  tax  accruements  of  capital- 
ised property  by  deed  of  gift  or  by  inheritance,  must  be  blamed 
in  so  far  as  they  tax  those  variations  of  value  in  the  productive 
sources  which  are  reahsed  as  gains  and  losses  in  the  purchase 
or  sale  of  property.  ^  Even  more  blame  worth}'-  are  the  Itahan 
courts,  which  persist  in  declaring  subject  to  the  tax  upon  the 
income  from  personal  property  the  sum  realised  by  the  sale  of 
a  good-will,  taking  the  strained  view  that  this  sum  constitutes 
a  realisation  of  income  not  previously  taxed.  Finally,  exempt 
from  income  tax  should  be  the  various  kinds  of  non-recurrent 
gain,  such  as  those  derived  from  gambhng,  or  from  charitable 
gifts,  or  such  as  a  sum  paid  in  one  single  payment  on  the  reahsa- 
tion  of  an  insurance  policy.  Hence,  strictly  speaking,  the  in- 
comes of  charitable  institutions  ought  to  be  exempt  from  income 
tax,  since  these  either  go  to  provide  the  incomes  of  those  em- 
ployed by  such  institutions,  and  in  that  case  are  taxed  in  the 
hands  of  these  latter,  or  else  they  go  to  form  non-periodic 
accruements  received  by  the  beneficiaries  of  the  institutions, 
and  must  as  such  be  exempt.  Hence,  in  Holland,  during  the 
eighteenth  century,  it  is  in  error  that  charitable  receipts  are 
taxed ;  and  the  Court  of  Appeal  at  Rome,  in  its  decision  of 
September  1st,  1903,  is  wrong  in  holding  subject  to  taxation 
oblations  made  by  the  faithful  to  the  coffers  of  the  Church  ; 
since  these  are  employed  wholly  or  in  part  in  the  form  of 
charity,  thus  constituting  non-periodic  accruements. 

1  Toesca  di  Castellazzo,  Uammortizzazione  del  prezzo  di  awiamento  di  una 
azienda  e  Vimposta  di  ricchezza  mobile,  Turin,  1906. 

*  Altogether  wrong,  again,  is  the  decision  of  the  Italian  Central  Commis- 
sion of  Direct  Taxation,  dated  Nov.  6th,  1906  (since  reaffirmed  by  the  Tribunal 
of  Pavia,  Jan.  3rd,  1908,  and  by  the  Court  of  Appeal  of  Rome,  Dec,  1908),  to 
the  effect  that  the  premium  or  surplus-price  of  new  shares  issued  by  a  Limited 
company  already  established  is  subject  to  the  tax  upon  the  income  from 
movable  wealth.  If,  indeed,  the  surplus-price  of  the  shares  is  due  to  an 
increase  in  the  income  of  the  undertaking,  this  increase  of  income  should 
be  subject  to  increased  taxation  upon  the  income  of  the  company  or 
of  its  shareholders.  But  it  is  not  right  that  income  tax  should  be  imposed 
upon  the  capitalisation  of  this  additional  income,  inasmuch  as  this  capitalisa- 
tion lacks  the  characteristic  of  periodicity  which  is  essential  to  the  con- 
cept of  income.  This  does  not  exclude  the  right  of  the  revenue  authorities, 
when  there  is  manifest  an  increase  in  value  of  an  element  of  capitalised 
property,  to  tax  this  by  means  of  legacy  duty,  or  by  means  of  a  tax  (imposed 
on  one  occasion  only)  upon  a  fortuitous  access  of  wealth,  or  upon  gratuitous 
enrichments,  or  upon  stock  for  immediate  consumption. 


The  Kinds  and  Degrees  of  Income        163 

Income  tax  should  not  apply  to  any  part  of  the  expenses  of 
production,  for  these  are  not  income  ;  hence  it  must  never 
be  levied  upon  what  is  called  gross  income.  In  fact,  a  pro- 
portional tax  upon  gross  income  affects  the  various  incomes 
proportionately  only  on  the  hypothesis  that  the  expenses  of 
production  form  a  constant  fraction  of  the  product.  If  we 
suppose,  however,  that  there  are  different  kinds  of  production 
which  obtain  by  equal  expenditure  different  quantities  of 
product,  a  tax  proportionate  to  the  gross  income  is  dispro- 
portionate to  the  true  income,  and  (since  the  differential 
product  constitutes  rent),  it  effects  a  differential  taxation  of 
profit.  Thus,  if  three  undertakings.  A,  B,  and  C,  at  a  cost  of  100, 
produce  commodities  to  the  respective  amounts  of  160,  170, 
and  1 80,  this  means  that  A  yields  a  profit  of  60,  B  in  addition  a 
rent  of  10,  and  C  in  addition  a  rent  of  20.  Now  a  tax  of  10  % 
on  the  product  takes  from  the  undertaking  A  16,  or  21&6.  Qf 
the  profit  ;  from  the  undertaking  B,  the  tax  takes  17,  or  the 
same  amount  of  the  profit  and  y^  of  the  rent ;  from  the 
undertaking  C,  it  takes  18,  or  proportionately  the  same  as 
from  B.  Hence  this  tax  affects  one  pp.rt  of  income,  the  profit, 
to  a  greater  degree  than  it  affects  the  rent,  which  is  essentially 
inequitable.  1  Thus,  again,  if  the  gross  income  of  a  part  of 
the  tax-payers  increases  less  than  proportionately  to  the 
cost  of  production  (as  occurs  in  any  industry  subject  to  the 
law  of  diminishing  returns),  the  tax  proportional  to  gross 
income,  precisely  because  it  falls  preferentially  upon  rent, 
takes  the  form  of  a  preferential  tax  upon  the  more  extensive 
kinds  of  production,  in  which  rent  represents  a  larger  fraction 
of  the  total  income,  and  it  thus  becomes  transformed  into  a 
progressive  tax  upon  net  income.  Conversely,  if  the  gross 
income  increases  more  than  proportionately  to  the  cost  of 
production,  as  happens  where  the  law  of  increasing  returns 
apphes,  the  kinds  of  production  less  affected  by  the  tax  are 
those  which  are  more  intensive,  since,  in  these,  rent  pre- 
dominates, and  therefore  the  tax  upon  gross  income  takes  the 

*  The  observations  of  Ricardo  (W(yr]cs,  p.  112)  have  no  precise  application 
to  this  case  ;  for  these  observations  refer  to  a  specific  tax  upon  the  gross 
agrarian  product,  which  tax  repercusses  upon  the  consumer,  and  leaves  un- 
affected income,  profit,  and  rent  in  money ;  whereas  here  we  are  con- 
cerned with  a  general  tax  upon  mcome,  by  which  all  repercussion  is  per  se, 
excluded. 


164  The  Econoynic  Synthesis 

form  of  a  regressive  income  tax.  ^  One  way  or  another,  in  such 
conditions,  it  is  possible  to  avoid  unequal  incidence  of  taxation, 
by  imposing  on  the  gross  income  a  regressive  tax  where  we 
have  to  do  with  diminishing  returns,  and  a  progressive  tax 
where  we  have  to  do  with  increasing  returns.  But  no  measure 
of  readjustment  is  possible  when  the  various  tax-payers 
obtain  the  same  gross  income  by  means  of  varying  cost 
of  production ;  for,  in  such  conditions,  a  tax  upon  gross 
income,  whether  it  be  proportional,  progressive,  or  regressive, 
necessarily  and  irreparably  affects  in  varying  measure  the 
different  net  incomes,  and  more  particularly  (since  the  greater 
income  takes  the  form  of  rent)  effects  a  preferential  taxation 
of  rent.  Thus,  given  three  kinds  of  production  A,  B,  and  0, 
each  of  which  produces  1000,  the  cost  of  production  being 
respectively  800,  500,  and  300,  A  gives  a  profit  of  200,  B  gives  a 
profit  of  125  and  a  rent  of  375,  C  gives  a  profit  of  75  and  a 
rent  of  625.  Now  a  tax  of  10  %  upon  the  product  1000  takes 
from  each  of  these  undertakings  100  :  that  is  to  say,  it  takes 
from  the  undertaking  A,  50  %  of  the  profit  ;  from  the  under- 
taking B,  it  takes  50  %  of  the  profit=62-50,  -f  37-50  or  10  % 
of  the  rent  ;  from  C  it  takes  50  %  of  the  profit,  =37-50,  + 
62-50  =  10  %  of  the  rent.  Hence,  whilst  profit  is  taxed  to  the 
extent  of  50  %,  rent  is  taxed  only  to  the  extent  of  10  %.  For 
this  reason,  we  cannot  approve  of  the  practice,  in  accordance 
with  a  decree  in  former  times  of  Joseph  II,  or  in  accordance 
with  the  Bavarian  method  to-day,  of  taxing  the  gross  income 
derived  from  buildings  and  from  the  profit  of  capital,  without 
deductions  for  the  expenses  of  production  ;  nor  can  we  approve 
the  practice  of  certain  American  states  of  taxing  joint-stock 
companies  (for  example,  the  railroads)  upon  gross  income, 
however  much  they  may  endeavour  to  justify  the  method  by 


1  Thus,  in  Wisconsin,  it  is  calculated  that  in  the  case  of  those  railroads 
which  furnish  a  gross  income  of  $3000  per  mile,  the  expenses  amount  to 
59-58%  of  this  income,  whilst  in  the  case  of  those  railroads  which  yield  a 
lesser  income  the  percentage  of  expenses  is  higher,  until,  in  the  case  of  those 
which  yield  a  gross  income  of  less  than  $1500  per  mile,  the  expenses  rise  to 
the  figure  of  74-34%.  Therefore  the  tax  upon  the  gross  income  of  the  rail- 
roads, which  was  in  force  in  that  State  from  1854  to  1903,  and  which  until 
1876  was  proportional,  was  in  actual  working  a  regressive  tax  ;  and  it  was 
in  order  to  repair  this  defect  that  in  the  year  1876  the  tax  was  made  progres- 
sive. Consult  Snider,  The  Taxation  of  the  Oroaa  Receipts  of  Railways  in 
Wisconsin,  New  York,  1906,  pp.  58,  et  seq. 


The  Kinds  and  Degrees  of  Income        165 

alleging  technical  difficulties  in  effecting  the  requisite  deduc- 
tions from  gross  income. 

If  it  is  improper  for  income  tax  to  be  levied  upon  any  part 
of  the  cost  of  production,  it  is  evident  that  it  must  not  affect, 
either  directly  or  indirectly,  the  quota  of  the  product  which 
redintegrates  the  wage  capital  or  the  technical  capital  used 
up  during  the  process  of  production. — ^With  good  reason, 
therefore,  the  English  law  on  income  tax  provides  that 
in  the  incomes  in  Schedule  A  there  shall  be  subtracted 
from  the  taxable  income  the  cost  of  repairs,  and  that  in 
Schedule  D  subtractions  shall  be  made  for  depreciation  of 
machinery  and  buildings. — Altogether  wrong,  on  the  other 
hand,  is  the  Italian  revenue  authority,  which  applies  the  tax  on 
the  income  from  movable  wealth  to  agricultural  plant  and  live- 
stock, and  to  that  part  of  the  gross  income  of  limited  companies 
which  is  devoted  to  amortisations,  and  does  not  even  exempt 
amortisations  for  depreciation  on  account  of  decline  in  value 
of  raw  materials  or  of  manufactured  articles  deteriorated  or 
damaged,  nor  yet  those  for  bad  debts  unless  a  formal  judgment 
has  shown  these  to  be  irrecoverable.  Nor  can  the  subtraction 
permitted  to  limited  companies,  after  an  arduous  contest,  of 
an  annual  allowance  for  depreciation  of  5  to  6  %  upon 
machinery,  and  of  2J  %  upon  the  channels  and  conductors 
used  for  the  transmission  of  force,  be  regarded  as  an  adequate 
allowance  for  wise  industrial  management.  For  the  same 
reason,  the  wealth  expended  by  the  buyer  of  an  under- 
taking in  the  purchase  of  a  good- will,  or  wealth  devoted  to  a 
fund  for  the  replacement  of  the  capital  spent  in  acquiring  such 
a  good-will,  cannot  properly  be  subject  to  income  tax,  since 
this  quantity  of  wealth  goes  to  make  up  or  redintegrate  the 
cost  of  the  plant,  and  therefore  does  not  form  part  of  income. 
As  far  as  payment  for  good-will  is  concerned,  this  is  now  ad- 
mitted by  our  jurisprudence.  Thus  also  there  should  be 
subtracted  from  taxable  income,  annual  insurance  premiums 
against  loss  from  fire,  hail,  etc.,  since  these  also  are  redintegra- 
tion of  technical  capital. — ^For  the  like  reason,  there  should  be 
exempted  from  income  tax  that  part  of  capitahsed  property 
which  is  consumed  ;  hence  the  portion  of  a  terminable  annuity 
which  exceeds  the  normal  interest  upon  the  capital  employed 
in  the  purchase  of  the  annuit}-,  where  unproductively  con- 


1 66  The  Economic  Synthesis 

sumed,  should  be  exempted  from  income  tax,  since  it  is  part 
of  capital.  Precisely  such  is  the  practice  in  England.^  This 
does  not  exclude  the  taxation  of  such  wealth  by  a  tax  upon 
capitalised  property  or  upon  consumption. 

Nor  should  be  subject  to  income  tax  that  part  of  income 
which  is  saved  ;  for  this,  by  the  very  fact  of  saving,  becomes 
transformed  into  technical  capital  or  into  subsistence,  that  is 
to  say,  it  ceases  to  form  part  of  income,  individual  or  social. 
Indeed,  it  is  now  admitted  by  financial  experts  that  accumu- 
lated wealth  may  well  be  taxed  in  the  form  of  the  incomes 
which  it  will  produce  in  the  future,  but  that  it  cannot  be 
directly  subjected  to  income  tax  without  giving  rise  to  a 
double  taxation.  This  idea  inspires  the  Austrian  law  of  the 
year  1869,  and  the  law  of  Baden  of  1886,  which  exempt  forests 
from  income  tax  for  the  first  twenty-five  or  twenty  years  of 
their  existence  ;  for  in  actual  fact  forests,  during  the  period  in 
which  the  trees  are  not  yet  ripe  for  felling,  are  accumulated 
wealth,  not  income.  Indeed,  the  taxation  of  new  forests,  as 
practised  in  America,  is  really  a  tax  upon  saving,  and  leads  to 
premature  felling.  ^  For  the  same  reason,  the  Italian  law 
errs  in  taxing  the  income  from  movable  wealth,  for  this 
law  (Art.  30)  taxes  the  annual  incomes  of  trading  companies 
even  when  these  incomes  are  employed  in  the  improvement 
or  the  increase  of  capital.  ^  It  is  obvious  that  we  should  exempt 
from  income  tax,  annual  premiums  for  life-insurance,  as  is 
done  in  England  under  schedules  D  and  E  of  the  income  tax 
returns,  and  also  in  Austria  and  in  some  of  the  states  oi  the 
American  Union,  for  such  premiums  constitute  substantially 
a  quota  of  wealth  which  is  saved.* 

1  Fisher,  Income,  p.  401.  It  must  be  understood  that  Fisher,  in  accordance 
with  his  thesis,  which  includes  in  income  the  whole  of  the  life  annuity,  affirms 
that  the  whole  of  this  should  be  liable  to  income  tax.  But  here  I  cannot 
agree  with  him,  for  the  reasons  explained  in  the  text. 

2  Fisher,  I.e.,  pp.  253-4. 

^  It  is  true  that  some  joint-stock  companies,  in  order  to  avoid  the  taxa- 
tion of  their  dividends,  ostensibly  capitalise  these,  in  order  to  distribute 
them,  after  a  certain  time,  among  the  shareholders  in  the  form  of  capital. 
In  such  cases,  naturally,  these  fictitious  capitalisations  should  be  taxed  as 
part  of  income.  In  contradistinction  with  such  a  case,  we  have  that  which 
is  common  in  the  cotton  manufacturing  industry  in  England,  of  companies 
which,  in  order  to  swell  their  dividends,  neglect  to  redintegrat-e  the  capital 
used  up  {Royal  Commission  on  Labour,  London,  1892,  No.  1817). 

*  Kinsman,  The  Income  Tax  in  the  Commonwealths  oj  the  United  States, 
Now  York,  1003,  p.  103. 


The  Kinds  and  Degrees  of  Income       167 

But  all  that  part  of  the  product  which  remains,  after  the 
subtraction  of  technical  capital  and  subsistences  redintegrated 
or  newly  saved,  is  properly  subject  to  income  tax.  Hence  the 
thesis  of  certain  financiers  who  would  hke  to  confine  the 
incidence  of  income  tax  to  /ree  income,  that  is,  to  the  income 
which  remains  after  the  necessary  consumption  of  the  recipient 
of  income  has  been  effected,  cannot  be  sustained,  for,  as  we 
have  seen,  that  quantity  also  of  the  product  which  satisfies 
the  consumption  of  the  recipient  of  income  is  itself  income, 
and  ought  therefore  to  be  subject  to  income  tax. — ^For  the 
same  reason,  also,  all  that  part  of  income  which  the  recipient 
of  income  distributes  among  the  members  of  his  family,  or 
assigns  to  them  in  the  form  of  enjoyment,  should  be  taxed 
as  an  integral  part  of  his  own  income.  ^ 

The  tax  should  apply  to  income  whether  it  be  differentiated, 
undifferentiated,  or  mixed.  Hence,  if  the  subsistences  of  the 
labourer  are  exempt  from  income  tax,  none  the  less  taxable 
is  the  undifferentiated  income  received  by  the  labourer, 
whether  in  the  form  of  undifferentiated  income  strictly  so- 
called  (the  income  of  the  independent  artisan),  or  in  the  form 
of  mixed  income  (the  income  of  the  metayer,  the  working 
tenant  farmer,  the  profit-sharing  workman,  and  so  on). 

But  income,  as  we  have  seen,  after  having  been  immediately 
received,  whether  it  be  undifferentiated  in  the  hands  of  the 
productive  labourer,  or  differentiated  in  the  hands  of  the 
owner  of  productive  capital,  is  then  broken  up  into  a  number 
of  different  kinds  of  sub-income,  which  are  not  infrequently 
assigned  to  as  many  different  persons.  Now  the  tax  should 
not  be  levied  on  the  owner  of  productive  capital  except  in 
respect  of  that  portion  of  income  which  definitely  remains 
his,  after  the  detachment  of  all  the  portions  transferred  to 
other  recipients  of  income  (lenders  of  productive  and  un- 
productive capital,  landowners,  unproductive  labourers),  for 
these  portions  ought  to  be  directly  taxed  in  the  hands  of  their 

'^  Art.  19  of  the  Italian  law  of  August  24th,  1877,  for  the  taxation  of  the 
income  from  personal  property,  lays  it  dowm  that  gifts  in  kind  made  to  sons 
or  daughters  living  in  the  paternal  house  after  marriage  are  subject  to  the 
said  tax  only  when  these  gifts  have  the  character  of  emoluments  and  assigns 
and  are  at  the  free  disposal  of  the  taxpayer.  But  when  these  conditions  are 
not  fulfilled,  the  law  states  that  this  mass  of  wealth  shall  be  subject  to  the  tax 
upon  the  income  from  movable  wealth  in  the  hands  of  the  assignee.  Thus  in 
any  case  it  is  subject  to  income  tax. 


1 68  The  Economic  Synthesis 

holders  or  beneficiaries.  It  follows  that  income  tax  always 
lowers  the  rate  of  profit  in  a  less  proportion  than  its  own 
amount,  or  only  in  a  measure  corresponding  to  that  portion 
of  it  which  actually  falls  upon  profit. 

Hence  all  that  part  of  income  which  goes  to  pay  the  interest 
on  borrowed  capital  should  always  be  subtracted  from  the 
taxable  income  of  the  borrower,  and  should  be  taxed  in 
the  hands  of  the  lender  ^ ;  whence  it  follows  that  anything 
which  diminishes  the  amount  of  interest  payable  by  the 
borrower  increases  his  taxable  income.  Thus  a  co-operative 
credit  society  increases  the  taxable  income  of  its  members 
simply  owing  to  the  fact  that  it  diminishes  the  interest  they 
have  to  pay,  and  this  without  taking  into  account  the  income 
that  the  member  may  receive  as  his  share  in  the  gains  in  the 
society. — ^What  has  been  said  applies  no  less  to  the  interest  of 
unproductive  capital  than  to  that  of  productive  capital.  Thus, 
the  quantity  of  wealth  of  the  tax  paye''  which  goes  to  pay  the 
interest  on  pubHc  debt,  does  not  constitute  part  of  the  income 
of  the  tax  payer  himself,  and  therefore  (leaving  out  of  account 
a  limitation  which  we  shall  introduce  below)  ought  to  be 
taxed  in  the  hands  of  the  creditor  of  the  state,  who  receives 
the  interest.  To  put  the  matter  in  substantial  terms,  if  we 
suppose  that  there  exists  a  direct  relationship  between  the 
owner  of  productive  or  unproductive  elements  and  the  creditor 
of  the  state,  it  resolves  itself  to  this,  that  the  former  transfers 
a  part  of  his  income  to  the  latter,  and  that  subsequently  the 
tax  is  applied  separately  to  the  two  masses  of  income  as  they 

^  L.  9  c.  de  agr.,  11,  48,  justly  prescribes  that  if  the  quaestus,  or  the 
gains  derived  from  the  operce  of  the  colonus  fugitivua  accrue  to  the  land- 
owner with  whom  he  has  taken  refuge,  the  personal  tax  upon  the  slave 
shall  be  payable  by  his  master.  If,  however,  they  accrue  to  the  pro- 
fitgus,  as  happens  when  this  latter  works  as  a  wage-earner,  the  tax  must  be 
paid  by  the  labourer  himself.  It  is  alleged  against  the  exemption  from  in- 
come tax  sanctioned  in  England  in  the  case  of  incomes  below  £150  (or  since, 
1894,  below  £160),  that  this  exemption  enables  large  capitalists  to  elude 
taxation  by  lending  to  persons  enjoying  incomes  inferior  to  £160  ;  since  these. 
not  having  to  pay  income  tax,  cannot  deduct  the  amount  of  the  tax  from 
the  interest  they  pay  to  the  lenders  (Vocke,  Oeschichte  der  brit.  Sfeuem, 
Leipzig,  1866,  p.  580).  But  when  the  tax  is  levied  upon  the  lender,  this 
difi&culty  does  not  arise  ;  for  in  this  case  the  great  capitalist  is  taxed  in  pro- 
portion to  the  total  interest  which  he  receives  from  borrowers  large  and  small, 
and  he  derives  no  advantage  from  the  exemption  of  the  small  borrowers 
from  taxation.  It  Is  true  that  if  the  lender  receives  from  the  totality  of  his 
loans  less  than  £160,  this  sum  is  not  taxed  under  schedule  C,  but  it  goes 
to  increase  the  return  under  schedule  D,  and  if  the  total  income  of  the  lender 
exceeds  £160  it  is  subject  to  taxation. 


The  Kinds  and  Degrees  of  Income       169 

exist  in  the  hands  of  the  two  recipients.  Thus,  again,  the  part 
of  income  which  goes  to  form  the  profit  of  the  capital  of  retail 
trade  ought  not  to  be  taxed  in  the  hands  of  the  capitahst  or  of 
the  consumer  who  pays  it,  but  in  the  hands  of  the  trader  who 
receives  it.  It  follows  from  this  that  everything  which 
diminishes  or  annuls  the  profits  of  the  capital  of  retail  trade 
increases  the  taxable  income  of  those  who  consume  the  pro- 
ducts handled  by  that  capital.  Thus,  given  two  recipients  of 
incomes  primarily  equal,  one  who  buys  the  products  he  con- 
sumes from  a  wholesale  trader  transfers  to  trading  capital  a 
lesser  quota  of  his  income  than  one  who  buys  his  products 
from  the  retail  trader,  and  must  therefore  pay  this  trader's 
profit. — Hence,  though  the  two  incomes  appear  identical,  the 
former  has  a  larger  taxable  income  than  the  latter. — ^Thus, 
again,  if  up  to  a  certain  time  a  given  quantity  of  products  has 
been  supplied  to  the  consumers  by  means  of  a  retail  trader 
who  has  retained  a  part  thereof  in  the  form  of  profit,  but  now 
there  is  instituted  a  consumers'  co-operative  society,  there 
results  an  increase  of  taxable  income  among  the  members  of 
the  society,  rendering  it  possible  to  increase  the  amount  of 
income  tax  payable  by  them.  For  convenience  of  collection 
this  tax  may  be  levied  upon  the  co-operative  society  (as  is  done 
in  Saxe-Weimar)  ;  but  it  may  just  as  well  be  levied  on  the 
individual  members.  This  last  is  what  happens  in  the  king- 
dom of  Saxony,  where  the  consumers'  co-operative  society  is 
exempt  from  the  industrial  tax,  but  the  members  have  to  pay 
the  tax  upon  the  sums  refunded  in  partial  repayment  of  the 
price  of  their  purchases,  this  refund  being  an  increment  of 
income.^  A  similar  practice  has  been  sanctioned  by  the  Court 
of  Appeal  at  Rome  (February  2nd  and  April  1st,  1897). 

That  part  also  of  income  which  is  transferred  to  the  owners 
of  unproductive  elements  ought  not  to  be  taxed  in  the  hands 
of  those  who  pay  it,  but  in  the  hands  of  those  who  receive 
it.  Thus  the  part  of  the  income  of  the  tenant  which  is  paid 
to  the  landlord  in  the  form  of  house-rent  should  not  be  taxed 
in  the  hands  of  the  tenant,  but  in  the  hands  of  the  landlord. 
Precisely  for  the  same  reason,  one  who  inhabits  his  own  house 
ought  not  to  be  taxed  upon  the  presumed  rent  of  his  dwelling, 

*  Cf.  Ortloff,  Die  Besteuerung  der  Konsumvereine,  "  Jahrbiicher  N.E.," 
1906,  p.  153. 


1 70  The  Economic  Synthesis 

since  this  does  not  in  reality  bring  in  any  income  ;  whereas 
one  ought  to  be  taxed  who  rents  his  house  to  another,  since  the 
owner  in  this  case  derives  a  real  income  from  the  house.  ^  These 
conclusions,  as  we  know,  conflict  with  the  ordinary  method  of 
calculation,  which  taxes  the  tenant  upon  the  part  of  his  income 
spent  upon  rent,  and  the  owner  on  account  of  the  house  he 
himself  lives  in.^  But  it  is  none  the  less  true  that  such  a 
method  of  imposing  the  tax  effects  a  fictitious  dilatation  of  the 
taxable  area,  by  creating  incomes  where  they  do  not  really  exist. 
Assuredly,  if  the  estimated  rent  of  the  house-owner  who  lives 
in  his  own  house  bears  the  same  ratio  to  his  income  as  that 
borne  by  the  rent  actually  paid  by  a  tenant  to  the  residual 
income  of  the  latter,  the  enlargement  of  the  two  taxable  in- 
comes is  exactly  proportional,  and  therefore  there  is  no  varia- 
tion in  the  incidence  of  taxation  in  the  two  cases .  But  wherever 
the  estimated  rent  of  the  owner  who  lives  in  his  own  house  bears 
a  lesser  ratio  to  his  total  income  than  is  borne  by  the  rent 
actualty  paid  by  the  tenant  to  the  latter 's  residual  income,  the 
method  of  calculation,  which  includes  also  in  the  income  the 
rent,  real  or  presumed,  as  the  case  may  be,  effects  a  dispropor- 
tionate enlargement  of  the  income  of  the  tenant,  that  is  to  say, 
it  disproportionately  increases  the  tax  payable  by  the  lesser 
incomes,  which  is  altogether  oligarchic  and  inequitable.^ 

^  Lotz  regards  as  doubtful  the  propriety  of  a  tax  upon  rented  houses, 
since  such  a  tax  is  not  appHed  to  the  original  income  but  to  the  derived  in- 
come, or  to  that  which  one  class  receives  at  the  cost  of  another.  To  this 
Malchus  justly  objects  that,  from  whatever  source  the  rent  of  the  house  may 
ultimately  be  derived,  for  the  landlord  this  rent  always  constitutes  an  income, 
and  therefore  ought  to  be  taxed  ;  whereas  the  tax  ought  not  to  be  levied 
upon  the  tenant  who  pays  the  rent  and  for  whom  the  house  does  not  produce 
any  income.  But  this  writer  goes  on  to  say  that  the  ovmer  ought  to  pay  the 
tax  when  he  lives  in  his  own  house.  This  is  wrong  ;  for  if  the  tenant,  to  whom 
the  house  is  not  a  source  of  income,  ought  not  to  be  taxed,  no  more  should  he 
who  lives  in  his  o\vn  house,  who  is  in  the  same  condition.  (See  Malchus, 
Finanzwiasenschajt,  Stuttgart,  1820,  I,  pp.  2.30,  et  seq.).  It  is  further  worthy 
of  note  that  the  very  persons  who  contend  that  the  owner  ought  to  pay  the 
tax  upon  the  estimated  rent  of  his  omti  house,  deny  this,  with  manifest  in- 
consistency, where  public  affairs  are  concerned,  as,  for  example,  in  the  case 
of  charitable  institutions,  which  they  wish  to  be  exempt  from  all  taxation 
upon  the  buildings  occupied  by  these. 

2  Italian  law  on  the  taxation  of  buildings,  January  26th,  1865  ;  Income 
Tax  Law  of  Saxony,  July  2nd,  1878  ;  Prussian  Law,  July  24th,  1891,  sect. 
1.3  ;  etc. 

3  Thus,  for  example,  if  the  tenant.  A,  has  an  income  of  2000,  of  which  he 

fays  1000  in  rent,  and  the  o\\'ner,  B,  living  in  his  own  house,  has  an  income  of 
000,  and  his  house  could  be  rented  for  1000,  the  real  income  of  A  is  1000, 
and  that  of  B  is  3000,  so  that  A's  income  is  ^  of  B's.    Now,  according  to  the 


The  Kinds  and  Degrees  of  Income        1 7 1 

The  justice  of  these  considerations  will  appear  even  more 
clearly  when  it  is  pointed  out  that  the  payment  of  a  higher 
rent  is  not  infrequently  the  outcome  of  causes  which  'per  se 
also  lessen  the  effective  income  of  the  tenant,  as,  for  example, 
when  he  has  a  large  family.  Now  if  the  tax  be  levied  also  upon 
that  part  of  income  which  is  spent  on  rent,  the  less  well-to-do 
recipient  of  income  must  pay  just  as  much  as  if  he  were  better 
off,  simply  because  he  directly  receives  an  equal  income  ; 
whereas  this  inequivalence  is  avoided  when  the  rent  is  con- 
sidered as  a  subtraction  from  income,  and  when  the  taxable 
income  of  the  tenant  is  therefore  diminished  by  the  amount 
of  his  rent.  It  is  not  suggested  that  in  this  way  all  inconsist- 
ency is  obviated  ;  for,  even  by  this  method  of  calculation,  of 
two  individuals  enjoying  equal  incomes,  the  megalomaniac 
who  desires  a  sumptuous  habitation  disproportionate  to  his 
means  will  correspondingly  reduce  the  taxable  extent  of  his 
income,  and  will  pay  a  comparatively  small  tax,  whilst  the 
gourmand,  who  spends  little  in  rent  but  much  upon  salmon 
or  truffles,  has  a  larger  taxable  income  and  pays  a  compara- 
tively high  tax.  But  in  such  cases  there  is  not  properly  speak- 
ing any  inequivalence,  for  he  who  consumes  the  larger  part  of 
his  income  in  rent  creates  a  new  income  for  the  benefit  of  the 
landlord,  whilst  he  who  consumes  his  income  in  products  leaves 
unchanged  the  income  of  him  who  sells  these.  Hence,  in  the 
former  case  the  consumption  of  income  creates  in  the  hands 
of  the  one  who  sells  the  product  in  which  this  income  is 
consumed  a  new  object  upon  which  the  tax  may  be  imposed, 
whereas  in  the  latter  case  this  does  not  occur.  Hence  in  the 
former  case  the  state  can  exempt  from  taxation  this  expendi- 
ture on  the  part  of  the  recipient  of  income  without  diminishing 
the  quantity  of  material  wealth  placed  at  its  own  disposal, 

ordinary  method  of  calculation,  A's  income  would  be  estimated  at  2000 
and  B's  at  4000,  so  that  the  first  would  be  J  of  the  second.  In  the  former 
case,  therefore,  the  tax  payable  by  A  is  ^,  while  in  the  latter  it  is  ^,  of  the  tax 
payable  by  B,  so  that  the  second  method  of  calculation  taxes  the  tenant 
more  heavily  than  the  owner.  This  happens  because  the  part  of  income 
spent  by  the  tenant  in  rent  (1000)  bears  a  ratio  to  his  residual  income  (1000) 
of  1:1,  which  is  less  than  the  ratio  borne  by  the  estimated  rent  of  the  owner 
(1000)  to  his  real  income  (3000),  the  latter  ratio  being  1:3.  Only  if  the  esti- 
mated rent  of  the  oNvner  were  .3000,  would  it  bear  the  same  ratio  to  his  real 
income,  as  is  borne  by  the  rent  actually  paid  by  A  to  the  latt-er's  residual 
income — and  then  only  would  the  two  methods  of  calculation  fmrnish  similar 
results  ;  for  then  our  method  would  tax  A  upon  1000  and  B  upon  3000, 
whilst  the  customary  method  would  tax  A  upon  2000,  and  B  upon  0000. 


172  The  Economic  Synthesis 

whereas  in  the  latter  case  it  cannot  do  this  without  diminishing 
the  pubHc  revenue. 

From  these  considerations  it  follows  that  anything  which 
diminishes  or  annuls  house-rent  increases  the  income  of  the 
tenant,  and  to  that  extent  increases  his  taxable  capacity. 
Hence  a  co-operative  building  society  renders  its  members 
susceptible  of  further  taxation,  which  may  be  effected  directly 
by  taxing  the  members,  or  indirectly  by  taxing  the  society. 
The  grounds  for  this  additional  taxation  must  not  be  sought, 
as  Feitelberg  wishes,  in  the  fact  that  the  society  definitely 
secures  to  its  members  the  ownership  of  a  source  of  income  ; 
for  if,  as  commonly  happens,  the  member  himself  lives  in  the 
house  thus  obtained,  this  house  is  not  the  source  of  any  income. 
But  the  ownership  of  the  house  exempts  the  member  from 
the  need  for  transferring  a  part  of  his  income  to  a  landlord, 
and  in  this  way  it  effectively  increases  his  real  income  and 
enlarges  his  taxable  capacity. 

Finally,  that  part  of  the  income  of  the  owners  of  productive 
or  unproductive  elements  which  is  transferred  to  the  un- 
productive labourers  diminishes  to  that  extent  the  income  of 
the  former  to  create  or  to  increase  the  income  of  the  latter,  and 
therefore  ought  not  to  be  taxed  in  the  hands  of  the  owners 
who  transfer  it,  but  in  the  hands  of  the  labourers  who  receive 
it.  Hence  (however  unreasonable  this  may  appear  at  first 
sight),  all  that  part  of  income  which  is  spent  in  the  payment  of 
medical  or  legal  fees,  upon  theatres,  light  women,  the  hire  of 
servants,  engineers,  go-betweens,  teachers,  or  even  in  free  or 
charitable  allowances,^  ought  not  to  be  subject  to  taxation  in 
the  hands  of  those  who  make  these  disbursements,  but  only  in 
the  hands  of  those  who  receive  them,  provided  that  the}^  take 
the  form  of  periodic  accrue ments.  Here  also  we  have,  in 
substance,  to  do  with  a  different  method  of  calculation,  which 
in  the  greater  number  of  cases  will  not  effect  any  essential 

^  The  Austrian  Law  of  October  25th,  1896,  lays  down  that  charitable 
contributions  in  favour  of  private  individuals  which  are  the  outcome  of  con- 
tract, must  be  subtracted  from  the  taxable  income  of  the  donor,  and  taxed 
in  the  hands  of  the  recipient,  pro\ided  that  they  increase  the  latter's  income 
up  to  1200  krones,  at  which  level  the  tax  first  becomes  payable.  On  the  other 
hand,  allowances  jvhich  are  not  the  outcome  of  contract  cannot  be  subtracted 
from  the  taxable  income  of  the  donor.  Holland,  with  greater  consistency, 
during  the  eighteenth  century,  exempts  from  taxation  in  every  case  the  part 
of  income  expended  in  cliarity. 


The  Kinds  and  Degrees  of  Income        173 

change.  At  first  sight,  certainly,  the  method  of  calculation  we 
suggest  seems  to  create  a  special  advantage  for  those  who  buy 
unproductive  labour,  since  they  are  exempted  from  taxation 
upon  all  that  part  of  their  income  spent  in  this  way.  But 
since,  in  reality,  all  the  recipients  of  income,  whether  owners 
of  productive  or  unproductive  elements,  or  unproductive 
labourers,  must  devote  a  part  of  their  income  to  the  purchase 
of  unproductive  labour,  their  relative  condition  is  in  fact 
equalised.  The  substantial  result  is  a  general  reduction  of  all 
the  taxable  incomes  by  the  amount  spent  upon  unproductive 
labour  ;  but  this  reduction  does  not  per  se  modify  the  mutual 
ratio  between  the  taxable  capacities  of  the  individual  re- 
cipients of  income,  so  that  the  distribution  of  the  burden  of 
taxation  among  them  can  give  rise  neither  to  pre-eminence  nor 
to  injury.^  It  is  true  that  a  disadvantage  or  an  advantage 
may  in  some  cases  result,  when  the  portions  of  income 
expended  upon  unproductive  labour  vary  as  between  the 
different  recipients  of  income.  It  cannot,  in  fact,  be  denied 
that  the  exemption  from  taxation  of  the  portion  of  income 
expended  on  unproductive  labour  gives  immunity  from 
taxation  to  those  incomes  which  are  entirely  devoted  to  the 
purchase  of  unproductive  labour,  and  in  any  case  (leaving  out 
of  account  this  imaginary  hypothesis)  gives  a  positive 
advantage  to  those  incomes  which  are  devoted  in  greater 
proportion  to  the  purchase  of  unproductive  labour  ;  hence,  of 
two  possessors  of  equal  income,  the  one  who  spends  more 
upon  law-suits  and  mistresses  will  be  less  heavily  taxed  than 
the  one  who  spends  more  upon  food  and  furniture. — Here  may 
be  repeated  what  has  previously  been  said  regarding  house-rent, 

^  Thus,  for  example,  if  A,  an  owner  of  productive  elements  ;  receives  an 
initial  income  of  1000,  and  spends  300  of  this  in  the  purchase  of  unproductive 
labour,  his  taxable  capacity  is  1000  —  300  =  700,  while  that  of  B  (the  unpro- 
ductive labourer)  is  300  ;  whilst  if  we  tax  also  that  part  of  A's  income  expended 
upon  unproductive  labour,  the  taxable  income  of  A  will  be  1000,  and  that  of 
B  300.  Therefore  oiu*  method  of  calculation  seems  to  secure  an  advantage  for 
A.  But  in  reality  B  in  his  turn  must  also  divide  his  income  as  between  pro- 
ducts and  services,  and  we  may  assimie  that  he  does  so  in  the  same  pro- 
portions as  A,  spending  210  on  products  and  90  on  unproductive  labour  ; 
hence  the  taxable  capacity  of  B  will  be  210  only.  On  the  ordinary  method  of 
calculation  the  taxable  incomes  of  A  and  B  will  be  1000  and  300  respectively, 
whilst  according  to  our  method  they  will  be  700  and  210  ;  but  the  ratio 
between  the  two  taxable  incomes  is  equal  in  both  cases,  so  that  the 
burden  of  taxation  remains  identical,  as  between  the  two,  whichever  method 
be  adopted. 


174  The  Economic  Synthesis 

that  the  first  recipient  of  income  chooses  to  employ  his  income 
in  a  way  which  creates  a  new  income  for  the  benefit  of  those 
who  would  not  otherwise  have  received  it,  and  therefore  gives 
rise  to  a  new  taxable  portion  of  income,  whereas  this  does  not 
result  from  the  use  made  of  his  income  by  the  second  recipient. 
Hence  the  state,  which  has  need  of  a  given  sum  of  wealth,  can 
abstain  from  levying  a  tax  upon  that  part  of  income  which  is 
expended  by  the  first  recipient  of  income  on  unproductive 
labour,  without  for  that  reason  losing  the  revenue  which 
taxation  of  this  portion  of  income  may  bring  in,  since  it  can 
tax  this  in  the  hands  of  the  unproductive  labourers  for  whom 
he  has  created  income ;  but  the  state  cannot  refrain  from 
enforcing  its  demand  upon  the  second  recipient  of  income  with- 
out losing  a  portion  of  revenue,  inasmuch  as  the  expenditure 
of  the  second  recipient  of  income  does  not  create  a  new  income 
which  the  state  can  tax. 

The  part  of  income  spent  upon  unproductive  labour  ought 
to  be  exempt  from  taxation,  not  only  in  the  case  of  private 
unproductive  labour,  but  also  in  the  case  of  unproductive 
labour  carried  out  by  the  collectivity.  In  fact,  all  that  part 
of  income  which  is  employed  in  the  purchase  of  public  services 
is  income  which  is  withdrawn  from  the  tax-payers  to  be 
transferred  to  the  state  or  to  its  functionaries  ;  and  therefore, 
once  this  transference  has  been  effected,  this  portion  of  income 
ought  no  longer  to  be  taxable  in  the  hands  of  the  tax-payer. 
In  other  words,  when  a  new  tax  is  established,  this  tax  ought 
to  be  applied  to  the  income  which  remains  after  the  sub- 
traction of  the  taxes  previously  estabUshed  ;  for  the  part  of 
income  disbursed  in  the  payment  of  these  taxes  no  longer 
constitutes  part  of  the  effective  potentiality  of  the  tax- 
payer, but  has  been  transferred  so  as  to  form  part  of  the 
economic  potentiality  of  the  state.  ^  This  rule,  however,  is 
glaringly  violated  in  certain  kinds  of  taxation  formally 
different  from  income  tax,  but  which  effectively  taxes 
income  ;   for,  in  order  to  determine  the  basis  of  new  taxes  of 

1  Marsilj  Libelli  {Uimposta  e  la  sovraimposta  sui  terreni  del  regno  cf  Italia, 
Atti  dei  Georgofili,  1906,  p.  358)  justly  points  out  that  in  order  to  determine 
the  agrarian  income  taxable  by  the  state,  it  would  be  proper  to  subtract 
from  the  total  agrarian  income  the  quota  of  the  local  taxes  on  the  land.  In 
Prussia  and  in  Austria,  to  ascertain  the  net  income,  subtraction  is  made, 
in  addition  to  that  for  other  liabilities,  for  the  direct  taxes  imposed  by  the 
state  and  even  for  certain  indirect  taxes. 


The  Kinds  mid  Degrees  of  Income        175 

this  kind,  not  only  is  no  subtraction  made  from  the  initial 
income  on  account  of  the  mass  of  income  levied  by  the  old 
taxes,  but  this  sum  is  even  added  to  that  mass,  thus  increasing 
the  basis  of  the  new  tax  in  proportion  to  the  entity  of  the 
pre-existent  taxes.  In  this  way  every  fresh  tax  effects  per  se 
an  increase  in  the  taxable  area,  and  furnishes  a  justification  for 
yet  more  taxation ;  so  that  by  such  a  method  of  calculation 
it  would  be  theoretically  possible  to  proceed  with  taxation 
until  there  had  been  effected  the  complete  absorption  of  the 
tax-payer's  income. 

We  conclude,  therefore,  that  the  tax,  when  assessed  in  the 
proper  manner,  should  be  levied  upon  the  various  kinds  of 
income  in  the  hands  of  their  effective  possessors,  and  not  in 
the  hands  of  the  immediate  recipients  of  total  income,  those 
from  whom  the  various  kinds  of  income  are  successively 
detached.  Only  on  the  ground  of  convenience  of  collection  is 
it  permissible  that  the  tax  should  actually  be  levied  upon  the 
original  recipients  of  the  total  income,  who  will  then  transfer 
a  correlatively  diminished  quantity  of  the  incomes  of  various 
kinds  to  their  secondary  recipients.  ^  When  a  single  individual 
receives  several  incomes  of  different  kinds,  income  tax  may  be 
levied  separately  on  each  kind ;  but  it  may  happen,  conversely 
or  in  addition,  that  the  tax  is  levied  on  the  sum  of  the  different 
kinds  or  upon  the  total  income.  This  necessarily  happens 
whenever  the  tax  upon  the  individual  kinds  of  income  is 
insufficient  to  make  up  the  financial  estimate,  and  the  deficit 
must  therefore  be  supplied  by  a  tax  upon  the  total  income.  ^ 

If,  then,  the  question  be  asked  in  what  measure  should  be 
taxed  the  various  kinds  or  the  various  degrees  of  income,  the 

^  Thus  in  Germany  there  prevails  the  practice  of  the  Kassenabzug  ("  col- 
lection at  the  source  "),  that  is  to  say  the  tax  is  levied  upon  those  through 
whose  hands  pass  the  incomes  of  a  person  before  that  person  actually  receives 
them,  so  that  the  temporary  holders  have  to  declare  the  income.  For  example, 
the  banks  are  taxed  upon  the  incomes  of  private  depositors,  joint-stock  comi- 
panies  are  taxed  (as  we  have  already  seen)  upon  the  dividends  they  pay  to 
their  shareholders,  and  so  on  (Ozeroff  [Development  of  Direct  Taxation  in 
Oermany],  Petersburg,  1890,  pp.  48-50).  Similar  methods  are  prescribed  in 
Italy  by  Art.  15  of  the  Law  of  August  24th,  1877,  and  are  proposed  in  France 
for  the  taxation  of  the  interest  on  the  public  debt. 

*  Thus  in  France  the  purpose  of  the  income  tax  bill  brought  forward  in 
the  year  1906  was  to  create  simultaneously  a  tax  by  schedule  upon  the  in- 
dividual kinds  of  income,  and  a  tax  upon  total  income  ;  and  the  same  pro- 
posal was  made  in  England  by  the  Extra-Par Uamentary  Commission  tliat  sat 
under  the  presidency  of  Dilke. 


176  The  Econo7nic  Synthesis 

reply  differs  substantially  according  as  the  incomes  of  varying 
kind  or  of  varying  degree  are  or  are  not  mutually  convertible. 
In  the  former  case,  the  tax  should  be  levied  proportionally  on 
the  different  incomes  ;  for,  as  soon  as  one  of  them  is  taxed  at  a 
higher  rate  than  the  others,  those  who  receive  any  of  that 
particular  income  will  hasten  to  disembarrass  themselves  of  it 
by  transferring  their  holdings  to  more  favoured  kinds  of 
income,  thereby  diminishing  the  rate  of  income  in  these,  and 
leading  to  a  rise  in  the  rate  of  income  in  the  more  highly  taxed 
varieties  of  income  ;  and  this  process  will  terminate  only  when 
the  rate  of  income  of  the  two  kinds  of  income,  less  tax,  shall 
have  become  precisely  equal.  Thus,  in  certain  of  the  States 
of  the  American  Union,  the  exemption  from  taxation  of  money 
advanced  on  mortgage  gives  rise  to  a  great  influx  of  capital 
seeking  investment  in  mortgages,  and  this  induces  a  marked 
fall  in  the  rate  of  interest  on  mortgages.  At  Baltimore  we  find 
that  many  new  houses  are  built  and  offered  at  very  low  rents 
precisely  in  consequence  of  the  great  amount  of  capital 
advanced  on  mortgage  at  an  exceptionally  low  rate  of  interest 
owing  to  the  immunity  from  taxation  of  money  thus  advanced.  ^ 

When,  however,  the  various  kinds  of  income  are  not  mutu- 
ally convertible  they  may  be  taxed  according  to  different 
measures  without  therefore  giving  rise  to  any  loss  of  equi- 
librium, or  provoking  any  reaction.  Hence  the  rent  of  land, 
whether  urban  or  agricultural,  can  be  taxed  more  or  less  than 
the  profit  of  capital,  since  the  landowner  cannot  transform 
himself  into  the  capitalist,  nor  the  capitalist  into  the  land- 
owner. 

But  the  possibility  of  taxing  according  to  different  measures 
two  kinds  of  income  that  are  mutually  inconvertible  is 
rendered  a  necessity  by  two  fundamental  considerations. 

In  the  first  place  it  may  happen  that  a  particular  kind  of 
income  can  come  into  existence  only  on  condition  that  it  at- 
tains a  certain  quantity,  and  in  that  case,  if  this  kind  of  income 
is  socially  necessary,  it  should  be  taxed  only  in  such  a  measure 
as  wiU  permit  it  to  reach  the  requisite  figure,  and  this  measure 
may  be  lower  to  any  extent  than  the  measure  in  which  incomes 
of  other  kinds  are  taxed.     This  consideration  applies  with 

^  Ely,  Taxation  in  American  States  and  Cities,  New  York,  1888,  pp.  350, 
et  seq. 


The  Kinds  and  Degrees  of  Income        1 77 

especial  force  to  the  taxation  imposed  upon  the  holders  of 
public  debt. 

The  state,  when  it  procures  by  taxation  the  means  by  which 
to  pay  the  interest  on  pubhc  debt,  effects,  in  substance,  the 
withdrawal  from  the  owners  of  productive  or  unproductive 
elements  of  a  part  of  their  income,  in  order  to  transfer  it  to  its 
own  creditors.  If,  however,  after  this  transference  has  been 
effected,  the  residual  income  of  the  proprietors  and  the  in- 
come of  the  creditors  of  the  state  are  taxed  in  proportional 
measure,  the  income  of  the  former  is  subjected  to  enhanced 
taxation,  inasmuch  as  it  has  previously  been  taxed  by  levying 
the  interest  of  the  public  debt.  If,  therefore,  we  wish  to  effect 
a  rigorousty  just  taxation,  it  is  necessary  that  the  creditors  of 
the  state  should  be  taxed  at  a  higher  rate.  But  this  is  possible 
only  on  condition  that  the  creditor  of  the  state  is  satisfied  with 
the  interest  thus  diminished  by  the  enhanced  tax.  For,  if 
the  creditor  of  the  state  finds  that  he  is  able  to  lend  his  capital 
to  the  state  only  at  the  rate  of  interest  which  remains  after 
the  proportional  tax  has  been  deducted,  enhanced  taxation 
of  the  interest  of  the  public  debt  will  merely  cause  a  rise  in 
the  rate  of  interest  upon  pubHc  borrowings,  at  any  rate  upon 
those  effected  subsequently  to  the  imposition  of  the  tax ;  that  is, 
in  such  a  case,  the  specific  burden  upon  the  owner  of  productive 
and  unproductive  elements  is  effectively  increased,  notwith- 
standing the  measures  intended  to  diminish  it.  Nay  more,  it 
mayhappen  that  the  creditor  of  the  state  succeeds  in  indemnify- 
ing himself,  owing  to  the  rise  in  the  rate  of  interest,  even  for 
the  proportional  taxation,  thus  wholly  transferring  his  burden 
to  the  other  taxpayers  ;  and  in  that  case  the  tax  is  in  reality 
levied  exclusively  upon  the  income  of  the  owners  of  productive 
and  unproductive  elements,  leaving  altogether  immune  from 
taxation  the  accrue ments  of  the  creditors  of  the  state. 

In  any  case,  the  tax  upon  the  income  of  the  creditor  of  the 
state,  even  if  it  be  established  at  a  measure  equivalent  to  that 
which  affects  all  other  kinds  of  income,  cannot  effect  a  reduc- 
tion of  the  interest  upon  the  public  debt  below  that  rate  which 
the  lender  considers  an  indispensable  condition  for  making 
the  loan,  without  uselessly  provoking  a  twofold  transference 
of  w^ealth,  from  the  creditor  to  the  state  in  the  form  of  a  tax, 
and  from  the  state  (or  from  the  owners  of  productive  or  un- 


178  The  Economic  Synthesis 

productive  elements)  to  the  creditor  in  the  form  of  a  rise  of  the 
rate  of  interest.  The  effect  is  even  worse  than  this,  for  taxation 
of  the  interest  of  public  debt,  reducing  the  interest  upon  that 
debt  below  the  rate  regarded  as  essential  by  the  lenders,  makes 
it  impossible  for  the  state  to  issue  its  own  securities  at  par, 
and  it  is  therefore  under  the  necessity  of  returning  to  its 
creditors,  when  the  debt  comes  to  be  paid,  a  capital  greater 
than  that  which  it  received  from  them,  and  in  any  case  the 
possibiHty  of  conversion  is  postponed,  thus  inflicting  a  loss 
upon  the  state.  Hence,  in  such  a  case  it  is  much  simpler  to 
exempt  from  taxation  the  interest  of  public  debt,  since  this 
enables  the  creditor  to  stipulate  at  the  outset  that  the  loan 
shall  be  issued  at  that  rate  of  interest  at  which  he  is  disposed 
to  advance  his  capital  when  he  is  certain  that  that  interest  will 
not  be  subjected  to  deductions  of  any  kind.  We  see,  therefore, 
that  what  we  said  above  to  the  effect  that  the  part  of  income 
transferred  to  the  creditor  ought  to  be  taxed  in  the  hands  of 
this  latter,  is  true  only  where  the  creditor  does  not  make  the 
payment  of  a  given  interest  the  condition  of  the  loan. 

What  has  been  said  of  the  creditors  of  the  state  is  no  less 
valid  of  the  creditors  of  private  individuals.  It  is,  in  fact, 
certain  that  the  mortgager,  in  so  far  as  he  is  taxed  in  a  differ- 
ential measure,  or  (as  happens  when  the  tax  falls  upon  net- 
produce)  in  so  far  as  he  is  constrained  to  pay  the  whole  tax 
upon  the  interest  with  which  he  is  burdened,  will  never  be  able 
to  relieve  himself  of  this  charge  by  demanding  a  corresponding 
reduction  in  the  rate  of  mortgage,  if  the  mortgagee  makes  the 
maintenance  of  this  rate  an  absolute  condition  of  the  loan. 
Similarly,  it  is  evident,  that  if  a  tax  be  levied  upon  the 
mortgagee,  as  soon  as  this  diminishes  the  effective  interest 
below  the  rate  he  requires,  he  will  pass  on  the  burden  to  the 
debtor  by  raising  the  rate  of  interest  on  the  mortgage.  Thus 
the  annual  mortgage  tax  imposed  by  the  State  of  New  York 
is  regularly  passed  on  to  the  debtors  by  raising  the  rate  of 
interest,  and  for  this  reason  it  was  found  necessary  in  the  year 
1906  to  replace  it  by  a  registration-duty .  ^     Now  in  such 

1  "  Quarterly  Journal  of  Economics,"  1906,  p.  614.  In  California,  on  the 
other  hand,  the  tax  upon  money  borrowed  on  mortgage  is  partially  trans- 
ferred to  the  creditor  ;  and  in  New  England  the  tax  imposed  on  the  Savings 
Banks  on  account  of  their  advances  on  mortgage  is  transferred  to  the  debtors 


The  Kinds  and  Degrees  of  Income        1 79 

conditions,  it  is  far  more  logical  and  straightforward  to  exempt 
mortgages  from  taxation  at  the  outset. 

Putting  aside  the  cases  just  analysed,  the  need  for  taxing  in 
different  measure  the  various  kinds  of  income  is  imposed  by 
considerations  of  strict  justice. — In  fact,  a  tax  which  takes 
an  equal  amount  of  wealth  from  equal  incomes  (even  where 
apphed  according  to  all  the  rules  hitherto  analysed)  is  pre- 
cluded by  the  fact  that  these  incomes  may  be  obtained  at 
varjdng  capital  outlay,  and  may  therefore  present  a  different 
rate  of  income.  Now,  to  avoid  such  inequivalence,  it  is 
necessary  to  take  into  account  the  ratio  between  the 
income  and  the  capital  outlay  of  the  individual  taxpayers, 
and  to  regard  as  surplus  income  all  that  part  of  individual 
income  which  exceeds  the  minimal  rate  of  income,  and  then 
to  apply  differential  taxation  to  the  surplus  income  thus 
determined.  For  example,  given  a  number  of  taxpayers  who 
receive  an  income  of  1000,  derived  in  the  respective  cases  from 
a  capital  (or,  in  more  general  terms,  obtained  at  a  cost,  which 
may  be  constituted  by  capital,  intelhgence,  labour,  etc.)  of 
20,000,  15,000,  and  10,000,  the  income  of  the  first,  which  bears 
to  the  capital  outlay  the  minimal  ratio  of  5  %  is  all  normal 
income  ;  but  the  income  of  the  second  is  normal  income  to 
that  extent  which  corresponds  to  5  %  upon  the  capital  of 
15,000  (750),  while  the  remainder  (260)  is  surplus  income  ;  and 
the  income  of  the  third  is  normal  to  the  extent  of  500,  the 
remaining  500  being  surplus  income.  Now  the  tax  should  not 
be  levied  in  equal  measure  upon  the  normal  income  and  the 
surplus  income,  but  the  latter  should  be  taxed  at  a  higher  rate, 
for  it  is  substantially  a  gratuitous  income,  or  is  obtained  without 
any  increase  of  capital  outlay.  This  is  why  the  rent  of  land,  and 
the  surplus  income  due  to  monopoly  or  to  the  ownership  of  a 
greater  capital,  ought  to  be  subject  to  differential  taxation.^ 

But  equal  incomes,  having  an  equal  rate,  must  sometimes 

only  in  part  (Spahr,  Present  Distribution  of  Wealth,  New  York,  1896,  p.  155, 
note).  This  proves  that  in  these  cases  the  taxes  leave  to  the  mortgagees  a 
sufficient  rate  of  interest,  or  a  rate  very  little  inferior  to  what  is  regarded  as 
sufficient. 

^  From  this  point  of  view  the  analytical  method  of  the  schedule  which  is 
employed  in  England  for  the  determination  of  the  taxable  income  is  better 
than  the  synthetic  method  in  use  in  Germany,  since  the  former  renders  it 
possible,  by  varying  the  mode  of  assessment,  to  vary  the  rate  of  taxation 
levied  upon  different  kinds  of  income.    In  France,  too,  notwithstanding  the 


i8o  The  Economic  Synthesis 

be  taxed  in  different  measure  on  account  of  the  different  waj^s 
in  which  they  are  employed.  In  fact,  we  have  seen  that  that 
part  of  the  initial  income  which  is  saved,  ceases  to  be  income 
and  is  converted  into  technical  capital  and  subsistence,  and 
therefore  should  not  be  subject  to  taxation.  It  follows  from 
this  that  those  kinds  of  income  of  which  a  larger  proportion 
is  devoted  to  saving,  offer,  ceteris  paribus,  a  smaller  taxable 
area.  Now,  as  we  have  seen,  the  unproductive  labourers, 
since  they  do  not  possess  a  capital  to  transmit  to  their  children, 
are  compelled  to  save — it  may  be  directly,  or  it  may  be  in- 
directly in  the  form  of  Hfe-insurance — in  much  greater  pro- 
portion than  are  the  owners  of  productive  and  unproductive 
elements.  Hence,  when  the  initial  or  apparent  incomes  are 
the  same,  the  unproductive  labourers  have  a  real  income 
smaller  than  that  of  the  owners  of  productive  and  unproductive 
elements,  and  their  income  therefore  possesses  a  smaller  taxable 
area.  Unless,  therefore,  we  exempt  from  taxation  that  part 
of  income  which  is  saved,  it  is  a  matter  of  plain  justice  that 
incomes  from  capitalised  property  shall  be  subject  to  differential 
taxation,  in  excess  of  the  taxation  levied  upon  professional 
incomes  ;  this  may  be  effected  by  taxing  incomes  from  capital- 
ised property  at  a  higher  rate,  or  by  instituting  a  tax  upon  capi- 
talised property  in  addition  to  the  general  income  tax  (Prussia), 
or  by  both  these  methods  at  the  same  time  (Holland). 

As  with  the  various  kinds  of  income,  so  also  with  the  various 
degrees  of  income,  there  may  be  imposed  on  these  taxation  at 
varjdng  rates.  In  fact  incomes  of  lesser  degree  are,  in  the  case  of 
differentiated  income,  permanently  inconvertible,  and  in  every 
form  of  income  are  not  immediately  convertible,  into  incomes 
of  higher  degree  ;  and  therefore  the  latter  may  be  taxed  at  a 
lower  rate  without  this  immediately  giving  rise  to  any  con- 
version of  minor  incomes  into  incomes  of  superior  degree. — 
Converse^,  the  greater  income  may  be  subjected  to  differential 
taxation,  without  this  giving  rise  to  the  splitting  up  of  that 
income  into  a  number  of  incomes  of  lesser  degree,  for  the 
advantages  derivable  from  the  large  size  of  the  income  are 

non-existence  of  income  tax,  land  rent  is  subject  to  differential  taxation — 
whilst  in  Italy,  in  the  case  of  the  incomes  of  labour,  taxation  is  levied  upon 
0-375  or  0-25  of  the  income ;  in  the  case  of  mixed  incomes  of  capital  and  labour 
the  tax  is  levied  upon  half  the  income ;  and  in  the  case  of  the  incomes  of  capital 
it  is  levied  upon  0-75  or  upon  the  whole  of  income. 


The  Kinds  and  Degrees  of  Income        i8i 

always  so  considerable  as  to  outweigh  any  injury  that  may 
result  from  the  differential  taxation. 

The  possibility  of  differential  taxation  of  superior  incomes 
becomes  an  inevitable  necessity,  by  the  rules  of  the  most 
simple  justice,  when  we  take  into  consideration  the  different 
modes  of  employment  and  of  consumption  of  incomes  of  vary- 
ing degree.  We  have  previously  seen  that  in  order  to  ascer- 
tain the  real  income,  and  therewith  the  taxable  income,  it  is 
necessary  to  subtract  from  the  mass  of  wealth  received  by  the 
recipient  of  income  what  is  transferred  by  him  to  the  owners 
of  unproductive  elements  and  to  unproductive  labourers.  It 
follows  from  this  that  in  the  case  of  the  recipients  of  income 
who  transfer  a  larger  part  of  their  income  to  owners  of  the 
unproductive  elements  or  to  unproductive  labourers,  the  ratio 
of  real  income  to  apparent  income  is  lower  than  that  which 
obtains  in  the  case  of  other  recipients  of  income.  We  have 
seen  above  that  the  fraction  of  income  expended  in  payment 
for  unproductive  elements  and  unproductive  labourers  is 
greater  in  proportion  as  the  degree  of  the  income  is  lower  ; 
that  is  to  say,  the  lesser  the  degree  of  the  income,  the  greater 
is  the  excess  of  the  apparent  income  over  the  real  income,  or, 
in  other  words,  as  we  descend  in  the  scale,  the  real  incomes 
decrease  more  than  proportionately  to  the  apparent  incomes. 
Hence  proportional  taxation  of  real  incomes  can  be  obtained 
only  by  means  of  the  progressive  taxation  of  apparent  incomes. 
Therefore,  in  the  modern  system  of  taxation,  which  deals  with 
apparent  incomes,  progressive  taxation  is  absolutely  essential 
to  the  attainment  of  elementarj^  justice. 

All  this  follows  when  we  accept  the  view  which  commonly 
prevails,  that  for  the  tax-pa3^er  the  tax  is  an  uncompensated 
sacrifice.  But  when  we  consider  the  tax  in  accordance  with 
that  elevated  modern  conception,  in  which  the  tax  is  regarded 
as  the  counterpart  or  the  equivalent  of  services  rendered  by 
the  state  to  the  tax-payer,  the  quantity  of  individual  income 
which  should  be  transferred  to  the  state  is  rigorously  deter- 
mined by  the  total  value  of  the  public  services  consumed  by 
the  respective  tax-payers,  and  is  therefore  regressive,  propor- 
tional, or  progressive,  according  as  this  value  increases  in  a 
ratio  less  than  proportional,  proportional,  or  more  than 
proportional,  to  the  real  income  of  the  tax-payer. 


CHAPTER   V 
THE   QUANTITY  OF   INCOME 

§  1.  Absolute  Quantity  of  Income 

1.  The  Product  of  Associated  Labour. 

Income  being  the  specific  product  of  the  coercive  association 
of  labour,  the  quantity  of  income  is  in  the  first  place  deter- 
mined by  the  quantity  of  the  product  of  associated  labour.  In 
its  turn,  this  quantity  is  a  function  of  two  factors,  the  quantity 
and  the  productivity  of  associated  labour. 

a.  The  Quantity  of  Associated  Labour. 

In  the  first  place,  the  quantity  of  associated  labour  is  more 
or  less  considerable  according  as  the  duration  and  the  intensity 
of  that  labour  are  greater  or  less.  The  duration  of  the  labour 
depends,  it  may  be  upon  physiological  reasons  (the  physical 
endurance  of  the  labourer),  it  may  be  upon  psychological 
reasons  (the  inclination  of  the  labourer  to  work),  it  may  be 
upon  technical  reasons  (for  example,  the  greater  or  less  possi- 
bility of  artificial  illumination),  it  may  be  upon  legislative 
reasons  (the  existence  of  legal  restrictions  upon  the  hours  of 
labour,  and  the  strictness  with  which  these  limitations  are 
enforced).  The  intensity  of  the  labour  depends,  it  may  be 
upon  the  spontaneous  energy  of  the  labourer,  it  may  be  upon 
the  irresistible  pressure  exercised  by  the  mechanical  instru- 
ments to  which  he  is  subordinated,  and  finally  it  may  be  by 
the  composition  of  the  labouring  population  in  the  matters  of 
sex  and  of  age — ^for  it  is  evident  that  of  two  numerically  equal 
groups  of  labourers,  that  group  in  which  women  and  children 
prevail  to  a  greater  extent  will  present  a  lesser  total  intensity 
of  labour  than  is  presented  by  the  group  in  which  adult  males 
are  more  numerous. — ^Now  the  composition  of  the  labouring 
population  in  the  matter  of  sex  and  age  depends  upon  a 
demographic  factor,  the  composition  of  the  total  population 

182 


The  Qttantity  of  Income  183 

in  the  matter  of  sex  and  age,  and  upon  a  legislative  factor,  the 
legal  regulation  of  labour. — ^If,  in  a  given  population,  women 
(in  consequence  of  a  higher  death-rate  among  the  men)  or 
children  (in  consequence  of  a  higher  birth-rate)  are  found  in 
higher  proportion  than  in  another  population,  it  is  probable 
that  the  ratio  of  women  and  of  children  to  adults  employed  in 
productive  labour  will  be  greater  in  the  case  of  the  former 
population  than  in  the  case  of  the  latter.  But  this  possibiHty 
is  subordinated  to  another  condition,  namely,  that  the  employ- 
ment of  the  labour  of  women  and  children  is  legally  permissible. 
— ^If  these  two  conditions  are  found  in  association,  the  country 
in  which  women  and  children  prevail  to  a  greater  extent  will 
exhibit,  for  any  given  number  of  labourers  employed,  a  lesser 
intensity  of  labour. 

But  the  duration  and  the  intensity  of  the  labour  accom- 
plished being  constant,  the  quantity  of  labour  may  vary  in 
accordance  with  the  variation  in  the  number  of  the  labourers. 
First  of  all,  the  population  remaining  unchanged,  this  number 
may  vary  through  an  increase  or  a  diminution  in  the  prevalence 
of  disease,  which  diminishes  or  increases  the  number  of  days  of 
labour  provided  by  the  working  population.  Putting  this 
aside,  it  is  certain  that  in  the  case  of  undifferentiated  income, 
in  which  the  number  of  the  productive  labourers  is  coincident 
with  the  totahty  of  the  population  competent  for  labour,  the 
quantity  of  labour  cannot  increase  unless  there  occur  an 
absolute  increase  in  the  quantity  of  the  population.  If,  on  the 
other  hand,  the  income  is  differentiated,  the  number  of  the 
labourers  is  dependent  upon  the  number  of  individuals  com- 
petent for  labour  who  are  not  owners  of  productive  or  unpro- 
ductive elements,  or  who  are  not  unproductive  labourers 
effectively  employed  by  such  owners.  It  can  therefore 
increase,  the  total  population  remaining  unchanged,  through 
the  conversion  of  a  part  of  the  owners  of  productive  or  un- 
productive elements,  or  of  the  unproductive  labourers,  or  of 
unoccupied  persons,  into  productive  labourers.  But  in  any 
case,  an  increase  in  the  labouring  population,  whether  or  not 
accompanied  by  an  increase  in  the  total  population,  can  occur 
only  on  condition  that  a  part  of  income  is  productively  saved. 

Hence  the  total  quantity  of  labour  productively  associated 
which  a  given  population  is  able  to  furnish,  is  a  function  of 


184  The  Economic  Synthesis 

three  variables  :  the  duration  of  labour  ;  the  intensity  of 
labour ;  and  (in  the  case  of  differentiated  income)  the 
economic  composition  of  the  population,  or  the  distribution 
of  population  in  varying  proportions  among  productive 
labourers,  unproductive  labourers,  owners,  and  unoccupied 
persons. — ^Now  do  these  three  factors  tend  to  increase  or 
to  diminish  in  the  successive  forms  of  income  ?  First  of  all,  as 
regards  the  duration  of  labour,  this  inevitably  undergoes  an 
increase  whenever  undifferentiated  income  is  replaced  by 
differentiated  income  ;  for  in  the  case  of  this  latter  the  arbiters 
of  production,  the  recipients  of  income,  cannot  fail  to  derive 
advantage  from  an  increase  in  the  hours  of  labour,  whereas  in 
the  case  of  undifferentiated  income,  the  arbiters  of  production 
suffer,  from  such  an  increase,  injury  alike  physiological  and 
moral.  The  immoderate  extension  of  the  hours  of  labour  which 
arises  under  the  regime  of  differentiated  income,  soon  demands 
legal  intervention  for  the  limitation  of  these  hours  ;  hence, 
with  the  further  development  of  differentiated  income,  the 
duration  of  labour  diminishes.  The  automatic  intensity  of 
labour  increases  in  every  successive  phase  of  income,  owing  to 
-the  gradual  increase  in  the  potentiality  of  the  technical  capital 
with  the  aid  of  which  labour  is  employed  ;  but  the  spontaneous 
intensity  of  labour  diminishes  when  undifferentiated  income 
is  replaced  by  differentiated  income,  for  this  latter  removes 
from  the  labourer  all  stimulus  to  accurate  and  intense  labour. 
On  the  other  hand,  'pari  passu  with  economic  progress,  there 
occurs  an  increase  in  the  numerical  ratio  of  women  to  men  (in 
consequence  of  a  fall  in  female  mortality),  and  hence  there  is 
an  increase  in  the  proportion  of  women  labourers  ;  whilst  the 
proportion  of  children  employed  must  in  any  case  rise  when 
undifferentiated  income  is  replaced  by  differentiated  income, 
since  in  the  case  of  the  latter,  the  worker,  under  pressure  of 
need,  devotes  his  children  in  addition  to  the  work  of  production 
— but  the  proportion  of  children  employed  tends  necessarily  to 
fall  with  a  fall  in  the  birth-rate.  In  view  of  all  these  considera- 
tions, the  intensity  of  labour  furnished  by  a  given  population 
does  not  necessarily  increase,  and  may  diminish,  as  the 
evolution  of  the  income  and  of  the  economy  proceeds. 

Finally,  the  numerical  ratio  of  the  labouring  to  the  non- 
labouring  population  exhibits  a  sensible  diminution  as  the 


The  Quantity  of  Income  1 85 

change  occurs  from  undifferentiated  to  differentiated  income  ; 
for,  whereas  in  the  case  of  the  former  the  whole  of  the  popula- 
tion works,  in  the  case  of  the  latter  a  part  only  works.  But 
this  fraction  of  the  total  population  which,  in  the  case  of 
differentiated  income,  is  devoted  to  labour,  undergoes  a 
progressive  diminution  in  the  course  of  any  ascendent  phase 
of  that  income,  for  (as  we  shall  see)  a  characteristic  feature 
of  such  a  phase  is  the  steady  decHne  in  the  numerical  ratio 
between  the  non-recipients  and  the  recipients  of  income. 

Wliilst,  therefore,  the  total  quantity  of  associated  labour 
unquestionably  exhibits  an  incessant  increase,  owing  to  the 
continuous  increase  in  the  total  population,  it  is  no  less  true 
that  the  mass  of  labour  furnished  by  a  given  quantity  of 
population  tends  to  decline,  owing  to  the  operation  of  a  series 
of  factors  which  diminish  the  duration  and  the  intensity  of 
labour  and  the  proportion  of  the  labouring  population  to  the 
total.  1 

6.  The  Productivity  of  Associated  Labour. 

a.  Technical  Productivity  and  Virtual  Economic  Pro- 
ductivity. 

The  mass  of  associated  labour  is  not  the  only  factor  upon 
which  the  quantity  of  the  product  depends,  for  this  is  deter- 
mined, in  addition,  b}^  another  element,  namely,  the  pro- 
ductivity of  the  labour.  The  productivity  of  associated 
labour  exhibits  an  ideal  maximum,  exclusively  determined  by 
the  efficiency  of  that  labour  and  of  the  elements  in  conjunction 
with  which  it  is  employed  ;  and  this  maximal  productivity 
constitutes  the  tedinical  "productivity  of  the  associated  labour. 
Tliis  productivity,  as  we  know,  is  greater  in  every  succes- 
sive phase  of  the  association  of  labour,  it  may  be  owing 
to  the  very  fact  of  the  unceasing  increase  in  population,  which 
by  itself  renders  possible  an  ever  more  ample  and  elaborate 
association  of  labour,  it  may  be  by  the  developing  aptitude 
and  the  increasing  education  of  the  labourer,  and  by  the 
advancing  evolution  of  technical  capital. — In  fact,  however 
diverse   the   influences   which   may   hinder   or   promote   the 

^  It  is  the  Russian  economists  (Karitchew,  Janson)  whom  we  have  to 
thank  for  the  first  attempt  at  the  elucidation  of  the  factors  which  determine 
the  total  mass  of  work  done  in  a  nation.  Previously  this  subject  had  merely 
been  treated  superficially  in  connexion  with  a  discussion  of  the  theory  of 
population. 


1 86  The  Economic  Synthesis 

employment  of  technical  capital  in  dilfferent  times  and  in 
different  places,^  it  is  certain  that  technical  capital  always 
tends  to  increase  in  quantity  and  in  efficiency  in  every  suc- 
cessive stage  of  the  association  of  labour.  It  is  true  that,  in 
proportion  as  the  productive  technical  capital  is  greater, 
greater  also  is  that  part  of  it  which  is  used  up  in  the  process 
of  production,  and  which  must  therefore  be  subtracted  from 
the  product  in  order  to  ascertain  the  income  ;  but  since 
productive  technical  capital  always  gives  a  product  in  excess 
of  its  own  wear  (since  otherwise  it  would  not  be  employed), 
the  progressive  development  of  technical  capital  ultimately 
increases  the  productive  potency  of  associated  labour. — ^To 
all  this  series  of  influences  is  due  the  fact  that  the  technical 
productivity  of  associated  labour  progressively  increases  in  all 
its  successive  forms. 

But  coercively  associated  labour  never  attains  to  that 
maximum  which  constitutes  its  technical  productivity.  In 
fact,  the  coercion  to  the  association  of  labour  can  only  be 
effected  through  the  employment  of  a  certain  quantity  of 
capital  and  labour  exclusively  devoted  to  the  function  of 
coercing  the  productive  forces.  The  capital  and  labour  thus 
immobilised  in  a  purely  coercive  and  discipHnary  function,  are 
thereby  divorced  from  the  productive  function  to  which  they 
could  otherwise  have  been  devoted  ;  hence  to  that  extent 
production  is  diminished. — ^If  the  quantity  of  labour  (and  of 
capital)  sterihsed  in  this  way  is  precisely  equal  to  that  which 
is  required  to  nourish  a  productive  undertaking,  or  a  certain 
number  of  productive  undertakings,  the  result  of  this  is  a 
diminution  of  the  total  mass  of  labour  and  of  product,  without 
however  there  resulting  any  diminution  in  the  relative  pro- 
ductivity of  the  labour  effectively  employed. — But  if  the 
quantity  of  labour  (and  the  same  may  be  said  of  the  capital) 
thus  divorced  from  production  is  greater  or  less  than  that 
which  is  required  to  nourish  one  or  more  productive  under- 
takings, this  renders  it  impossible  for  the  undertaking,  or  for 

1  Thus,  for  example,  in  the  United  States,  where — in  contrast  with  what 
happens  in  Europe — the  piecework  rate  of  wages  does  not  diminish  propor- 
tionately as  the  productivity  of  labour  increases,  the  workers  are  stimulated 
to  make  new  inventions  and  to  perfect  the  existing  technical  equipment. 
Herein  lies  one  reason  of  the  greater  frequency  of  such  inventions  in  the 
Great  Republic. 


The  Quantity  of  Income  187 

the  undertakings,  to  obtain  the  quantity  of  labour  necessary 
to  endow  this,  or  these,  with  the  maximum  productivity  ;  and 
therefore,  in  such  a  case,  the  productivity  of  labour,  or  the 
product  of  unitary  labour,  is  injuriously  affected. 

Again,  if  the  coercion  to  the  association  of  labour  absorbs 
labour  in  greater  measure  than  technical  capital,  or,  conversely 
(diminishing,  that  is,  in  greater  measure  the  supply  of  one  pro- 
ductive factor),  it  may  happen  that  the  undertakings  which 
have  an  especial  need  of  this  factor,  find  it  impossible  to  obtain 
all  that  they  require,  and  are  therefore  unable  to  institute 
that  due  proportion  between  the  productive  factors  upon 
which  the  maximum  productivity  of  labour  depends.  Herein 
we  see  a  new  reason  for  the  fact  that  the  productivity  of  labour 
falls  below  the  limit  ideally  attainable  in  the  actual  conditions 
of  technical  and  economic  development. 

But  the  coercion  to  the  association  of  labour  does  not  merely 
render  unrealisable  that  proportion  between  the  productive 
factors  which  would  endow  labour  with  its  maximal  pro- 
ductivity ;  this  coercion,  in  addition,  limits  the  efficiency  of 
the  productive  factors  even  when  these  are  combined  in 
rational  proportions,  and  therewith  attenuates  the  productive 
potency  of  the  association  of  labour. 

Now  these  negative  influences  which  coercion  exercises  upon 
the  process  of  production  have  the  effect  of  reducing  the  product 
of  associated  labour  below  the  limit  which  would  correspond 
to  its  technical  productivity.  That  is  to  say,  associated  labour 
can  attain  only  to  a  productivity  equal  to  the  technical  pro- 
ductivity diminished  by  the  limiting  influences  of  the  coercion 
that  is  employed,  and  this  we  shall  term  the  virtual  economic 
'productivity  of  coercively  associated  labour. 

In  normal  conditions,  the  limitation  imposed  upon  the 
productivity  of  labour  by  the  coercion  which  disciplines  it,  is 
directly  proportional  to  the  intensity  of  that  coercion. — ^Now, 
as  a  rule,  the  intensity  of  the  coercion  diminishes  in  the  suc- 
cessive forms  of  income,  either  (as  we  have  seen)  owing  to  the 
decrease  in  the  productivity  of  the  land,  whereby  is  dimin- 
ished the  reluctance  of  the  producers  to  associate  their 
labour,  or  else  owing  to  the  perfectionment  and  increasing 
potency  of  the  organs  effecting  the  association  of  labour, 
which  render  possible  the  attainment  of  the  same  result  with 


1 88  The  Economic  Synthesis 

a  continually  diminishing  expenditure  of  force.  The  family, 
matriarchal  and  patriarchal,  the  fratria,  the  clan,  the  sove- 
reign (in  Oriental  monarchies),  the  slave-owner,  the  feudal 
lord,  the  guild,  the  commune,  the  territorial  area,  the  state, 
the  capitaHst,  these  are  the  organs  effecting  the  coercive 
association  of  labour  in  the  successive  phases  of  income,  and 
they  present  an  increasing  scope  and  an  increasing  potency. — 
It  sometimes  happens,  indeed,  that  legislative  hindrances  are 
imposed  upon  the  potency  and  efficiency  of  associated  labour  ; 
but,  speaking  broadly,  it  is  none  the  less  true  that  the  work 
of  associative  institutions,  during  the  successive  periods  of 
evolution,  has  become  always  more  and  more  adapted  to 
promote  the  expansion  of  the  productive  forces.  On  the 
other  hand,  to  diminish  the  intensity  of  the  coercion  to  the 
association  of  labour  there  is  added,  in  an  advanced  phase  of 
evolution,  the  trade  union  which  brings  the  workers  together 
outside  the  factory,  and  which  renders  it  easier,  without  the 
employment  of  serious  coercion,  to  discipHne  associated 
labour.  Thus  it  is  an  established  fact  that  it  is  to  the  interest 
of  the  capitaHst  to  employ  trade  unionists,  for  the  very  bond 
which  associates  them  renders  it  easier  to  co-ordinate  their 
forces  to  a  common  end.^  Hence  the  successive  economic 
forms,  for  the  very  reason  that  they  involve,  as  a  rule, 
diminishing  coercion,  exhibit  a  progressive  productivity. 

Yet  it  is  none  the  less  true,  as  was  pointed  out  on  page  123, 
that  the  efficiency  of  the  association  of  labour  sometimes 
increases  owing  to  an  increase  in  the  intensity  of  coercion.  In 
fact,  the  coercion  to  the  association  of  labour  cannot  fulfil  its 
proper  function  of  effecting  the  co-ordination  of  the  productive 
forces,  unless  it  attains  a  certain  degree  of  intensity  ;  and  it 
follows  from  this  that  until  this  degree  has  been  attained,  every 
increase  in  the  intensity  of  the  coercion  increases  the  pro- 
ductive potency  of  labour,  or  diminishes  the  limitation  imposed 
by  the  coercion  upon  the  productive  efficiency  of  associated 
labour.  Hence,  within  certain  limits,  the  negative  influences 
exercised  by  the  coercion  may  be  inversely  proportional  to 
the  intensity  of  that  coercion,  or,  to  put  the  matter  in  other 
terms,  the  virtual  productivity  of  coercively  associated  labour 
may  be  directly  proportional  to  the  intensity  of  the  coercion. 

*  Hobson,  Problems  of  Poverty,  London,  1891,  p.  116. 


The  Quantity  of  Income  189 

Thus,  for  example,  differentiated  income,  for  the  very  reason 
that  it  involves  a  more  intense  coercion  than  undifferentiated 
income,  determines  a  more  extensive  sterilisation  of  the 
productive  forces  ;  and  to  this  result  there  contributes  in 
addition  the  fact  that  in  the  case  of  differentiated  income 
the  coercion  to  the  association  of  labour  is  brought  about  in 
virtue  of  the  fundamental  equation  V=R+x,  which  can  only 
be  attained  by  the  further  withdrawal  from  production  of 
capital  and  labour.  Yet  it  may  happen  that,  notwithstanding 
the  lesser  waste  of  capital  and  labour  owing  to  the  less  intense 
coercion,  the  association  of  labour  founded  upon  undiffer- 
entiated income  may  be  less  productive  than  that  founded 
upon  differentiated  income,  for  the  very  reason  that  in  the 
case  of  the  former  the  insufficiency  of  the  coercion  diminishes 
the  co-ordination  and  the  efficiency  of  labour.  This  explains 
why  it  is  that  in  the  course  of  evolution  we  sometimes  see 
forms  of  undifferentiated  income  replace  forms  of  differentiated 
income,  the  replacing  form  involving  a  higher  degree  of  coercion 
than  that  which  it  replaces,  as  when  the  communistic  economy 
is  replaced  by  slavery,  or  the  corporate  economy  by  the  wage- 
system.  This  occurs  because  these  forms  of  undifferentiated 
income  present,  precisely  on  account  of  the  deficient  intensity 
of  the  coercion  they  exercise,  an  inadequate  productive 
efficiency,  less  than  that  which  is  inherent  in  the  form  of 
differentiated  income  by  which  they  are  replaced.  ^  More 
generally,  within  certain  limits,  one  form  of  income  may 
present  a  technical  productivity  superior  to  that  of  another 
form  which  involves  a  lesser  degree  of  coercion,  and  for  this 
reason  the  former  may  victoriously  replace  the  latter  in  the 
succession  of  social  forms. 

1  As  to  the  deficiency  of  the  centralising  force  of  the  communistic 
economy  of  priinitive  times,  consult  Vinogradoff,  The  Growth  of  the  Manor, 
p.  32.  As  to  the  analogous  phenomenon  in  the  case  of  the  corporative  economy, 
see  SchmoUer,  Jahrbiich  fur  Gesetzg.,  1884,  pp.  641,  660.  Regarding  the 
analogous  phenomenon  in  connexion  with  modem  co-operative  institutions, 
see  David,  Sozialismus  und  Landwirtschaft,  Berlin,  1903,  pp.  540,  et  seq.,  and 
Bernstein,  Voraussetzungen  des  Sozialismus,  pp.  96,  et  seq.,  p.  108.  James 
Long,  in  the  "  Annals  of  English  Co-operation  for  1900,"  expresses  the  view 
that  co-operative  agriculture  in  England  is  a  failure,  owing  to  the  lack  of 
directive  ability  and  energy.  A  large  proportion  of  the  co-operative  societies 
founded  in  the  United  States  by  the  "  Knights  of  Labour,"  from  1882  on- 
wards, failed  owing  to  lack  of  experience  in  the  direction  of  these  enterprises 
(Hollander  and  Barnett,  Studies  in  American  Trades  Unionism,  London,  1906, 
p.  367). 


I  go  The  Economic  Synthesis 

Now,  since  normally  every  form  of  the  association  of  labour 
is  less  coercive,  and  for  that  reason  more  productive,  than  the 
precedent  form — or,  if  the  successive  form  is  more  coercive, 
it  is  so  only  in  those  exceptional  cases  in  which  the  greater 
coercion  involves  a  greater  productivity — ^the  conclusion  neces- 
sarily follows  that  in  every  case,  either  through  diminishing 
coercion  or  through  increasing  coercion,  the  coercive  associa- 
tion of  labour  must  present,  in  everyone  of  its  successive 
phases,  increasing  refinement  and  increasing  efficiency. 

This  is  what  we  find  in  actual  fact.  Emerging  from  the 
prehistoric  period  in  which  labour  is  completely  dissociated, 
we  find  in  primitive  times  the  complex  association  of  labour, 
or  the  specification  of  production,  effected  forcibly  and  with 
inflexible  rigour  by  means  of  the  institution  of  caste ;  and  we 
find  also  a  more  or  less  crude  simple  association  of  labour  ;  but 
we  do  not  find  any  trace  of  the  co-ordinated  association  of 
labour  within  the  individual  spheres  of  productive  activity. 
Even  the  association  of  labour  which  appears  in  the  com- 
munistic economy  of  the  earliest  days  is  Hmited  to  the 
disciplining  of  the  labour  of  individuals  under  a  concentrating 
authority,  without  there  occurring  any  co-ordination  of  the 
activities  of  the  different  labourers  or  any  correlation  of  their 
forces  to  a  common  end.  Even  if  such  co-ordination  arises, 
it  does  not  pass  beyond  the  limits  of  homogeneous  simple 
association,  wherein  the  individual  labourers  contribute  to 
the  collective  production  by  means  of  identical  operations. — 
Nor  is  it  otherwise  in  the  succeeding  phase  of  income,  the 
slave  system,  in  which  technical  development  is  meagre  and 
coercion  is  intense,  for  here  complex  association  and  homo- 
geneous simple  association  are  the  only  forms  w^e  encounter  of 
the  association  of  labour.^  Thus,  upon  the  slave  plantations 
of  the  southern  states  of  the  American  Union,  the  only  culture 
practised  was  spade -culture,  merely  agglomerating  upon  a 
single  area  of  land  a  number  of  isolated  labourers ^ ;  just  as 
the  association  found  by  Xenophon  among  the  slave  miners  of 

*  Feuerherd,  loc.  cit.,  pp.  79,  91-2  ;  Bliimner,  Technologic  und  Tcrminologie 
der  Oewerbe,  etc.,  hei  Oriechen  mid  RUmer,  Leipzig,  1875-9. 

*  Caimes,  The  Slave  Power,  pp.  47,  73  ;  Hahn,  loc.  cit.,  p.  397.  It  is  true 
that  certain  tentative  attempts  towards  the  heterogeneous  association  of 
labour  oecEisionally  occur.  Cf .  Philipps,  The  Origin  and  Growth  of  the  Southern 
Black  Belts,  "  American  Historical  Review,"  July,  1906. 


The  Quantity  of  Income  191 

Attica/  and  the  association  upon  the  Roman  villae,*  were 
simple  homogeneous  associations.  But  even  if  in  these  cases 
the  product  passes  through  several  distinct  phases,  the  raw 
material  being  first  produced,  and  then  transformed  into 
manufactured  articles, »  the  phenomenon  vnth.  which  we  have 
to  do  is  always  the  complex  association  of  labour,  or  the 
specification  of  the  productions,  which  is  unaffected  by 
the  fact  that  the  individual  specific  productions  are  con- 
centrated in  the  hands  of  the  same  proprietor,  or  in  a 
single  undertaking.  In  other  words,  all  this  has  nothing  to  do 
with  simple  heterogeneous  association,  which,  in  the  case  of 
the  income  of  the  slave-system,  has  no  means  of  coming  into 
existence. 

The  heterogeneous  association  of  labour  exhibits  certain 
slight  beginnings  towards  the  close  of  the  corporative  economy, 
for  in  many  of  the  more  advanced  artisan  industries  of  the 
Middle  Ages  it  was  the  practice  to  assign  the  individual 
labourers  to  different  and  co-ordinated  occupations  ;  but  we 
have  to  do  here  with  a  phenomenon  altogether  exceptional, 
and  it  remains  exceptional  also  in  the  opening  stages  of  the 
income  of  the  wage-system.  It  is  true  that  in  Florence,  the 
precocious  cradle  of  the  modern  economic  system,  the  wooUen 
industry  at  the  beginning  of  the  fifteenth  century  displays  the 
heterogeneous  association  of  labour,  or  the  assignment  of  the 
successive  phases  of  elaboration  to  workers,  some  of  whom  live 
in  separate  dwellings,  others  in  a  central  building.*  Moreover 
towards  the  end  of  the  seventeenth  century,  in  England,  Petty 
desires  the  concentration  of  men  as  the  begetter  of  associated 
labour  ^  ;  whilst  the  so-called  great  French  industry  of  the 
time  of  Louis  XIV  and  Louis  XV  does  not  in  fact  attain  to 
anything  beyond  the  agglomeration  in  a  single  place  of  a 
number  of  workers,  each  of  whom  carries  out  all  the  operations 
necessary  for  the  production  of  the  finished  commodity  ;  that 
is  to  say,  with  rare  exceptions^  there  has  hitherto  been  no  more 

'  Xenophon,  irocpoi  rj  irepi.  wpoaoSof,  IV,  32. 

*  Mominsen,  Rom.  Gesch.,  I,  pp.  414,  et  seq. 

^  Biicher,  Gewerbe,  "  Handwfirterb.  der  Staatsw.,"  p.  940. 

*  Doren,  Die  florentiner  Wollentuchinduatrie,  Stuttgart,  I,  1901,  pp.  42, 
et  seq.;  pp.  213-4,  220,  etc. 

'  Petty,  Several  Essays  in  Political  Arithmetic,  London,  1755,  p.  29. 
"  Cf.  Mantoux,  loc.  cit.,  p.  388  ;  in  the  manufacturing  industry  of  Abbevilld 
in  the  time  of  Louis  XIV,  "  each  specialty  is  placed  under  the  supervision  of 


192  The  Economic  Synthesis 

than  the  purely  environmental  and  entirely  homogeneous 
association  of  labour.  The  same  happens  in  Russia,  where  the 
great  industry  of  the  time  of  Peter  the  Great  is  founded  upon  a 
dwarfed  instrumental  base;  and  where,  again,  towards  1840, 
great  enterprises  bring  together  into  a  single  place  a  large 
number  of  labourers,  each  of  whom  works  with  his  own  instru- 
ment and  independently  of  the  others,  lest  they  should  desert 
the  collective  industry  to  found  an  undertaking  upon  their 
own  account.  This  form  of  industry  may  be  compared,  in  the 
biological  field,  to  the  coenohium  of  the  protozoa,  a  weak 
reticulum  of  cells  not  yet  united  to  form  a  tissue  ;  and  it  is 
always  h  mi  ted  to  the  sphere  of  the  homogeneous  association  of 
labour. 

But  it  is  only  in  the  wage  economj^  in  its  maturest  develop- 
ment, that  the  heterogeneous  association  of  labour  makes 
its  appearance.  Even  in  England  at  the  beginning  of  the 
eighteenth  century  the  heterogeneous  association  of  labour  is 
purely  embryonic  in  form;  whereas  at  the  same  time  in  Holland 
the  association  of  labour  properly  so-called  is  just  beginning, 
and  the  anonymous  author  of  The  Advantages  of  the  East 
India  Trade  to  England^  holds  up  Holland  as  an  example 
to  his  compatriots. — ^In  the  German  cities  at  this  epoch  we 
find  in  progress  what  Moser  speaks  of  as  industrial  simplifica- 
tion, that  is  to  say,  a  simple  heterogeneous  association,  assign- 
ing to  the  various  labourers,  instead  of  successive  phases  of 
elaboration,  the  production  of  the  individual  portions  of  a 
single  object,  such  as  a  watch. "  But  before  long  the  association 
of  labour  properly  so-called  becomes  diffused  and  settled  in 
England,  and  it  is  precisely  in  this  country  that  the  process  is 
for  the  first  time  scientifically  analysed,  by  Adam  Smith  ;  and 
this  association  is  the  nucleus  and  the  soul  of  manufacture, 
which  now  becomes  the  prevailing  form  of  industry.  Finally, 
in  a  subsequent  and  more  intense  phase  of  the  income  of  the 
wage-system,  the  association  of  labour,  released  from  the  limits 
within  which  it  has  previously  been  confined,  creates  a  cor- 
relative   and   vaster    technical   development,    and    becomes 

a  chief  who  disciplines  his  men  in  such  a  way  as  to  obtain  from  them  the  best 
possible  results  in  each  department,  in  order  to  contribute  to  the  perfection- 
ment  of  the  total  result." 

1  London,  1720,  p.  107. 

2  J.  Moser,  Patriotische  Phantasierif  Berlin,  1804, 1,  p.  190. 


The  Quantity  of  Income  193 

intensive,  giving  birth  to  a  more  potent  form  of  industry — 
machinofacture,  which  henceforward  is  in  undisputed  posses- 
sion of  the  field  in  the  most  divergent  spheres  of  production. 
And  from  the  wage-economy,  when  it  has  attained  its  fullest 
development,  machinofacture  extends  into  the  more  evolved 
manifestations  of  the  co-operative  economy,  which,  as  its 
forces  permit,  hastens  to  adapt  itself  to  the  new  and  mightier 
form  of  production. 

Though  we  saw  in  Chapter  III  that  every  form  of  industry 
can  be  combined  with  every  form  of  income  (undifferentiated, 
differentiated,  or  mixed),  we  see  now  that  the  more  highly 
evolved  forms  of  industry  cannot  effectively  develop  except 
in  the  more  advanced  phases  of  each  form  of  income,  since 
in  these  only  the  association  of  labour  is  released,  it  may 
be  from  the  anarchical  conditions,  it  may  be  from  the  rigid 
restrictions,  that  have  hitherto  prevailed,  and  attains  to 
a  full  and  adequate  elasticity.  Hence,  under  the  un- 
differentiated income  upon  a  communistic  or  corporative 
foundation,  and  under  the  differentiated  income  upon  the 
foundation  of  slavery  or  serfdom,  the  prevalent  association 
of  labour  is  always  environmental  or  homogeneous,  whereas 
the  extensive  and  intensive  heterogeneous  association  of 
labour,  that  is  to  say,  manufacture  and  machinofacture 
appear  only  under  the  differentiated  income  of  the  wage- 
system,  or  under  undifferentiated  income  upon  a  co-operati\e 
foundation. 

j8.   Effective  Productivity — Antagonism  between  Pro- 
duct and  Income. 

But  the  coercive  association  of  labour  cannot  always  attain 
to  its  virtual  economic  productivity  even  thus  circumscribed, 
since  a  number  of  influences  directly  connected  with  the 
structure  of  the  income  intervene  to  prevent  this.^ 

Assuredly,  if  we  assume  the  existence  of  the  most  favourable 
conditions,  wherein  that  productive  combination  which  gives 

^  It  might  be  thought  that  our  analysis  has  here  entered  a  vicious  circle  ; 
for,  whilst  we  have  previously  affirmed  that  the  quantity  of  the  income  is 
determined  by  the  quantity  of  the  product,  we  now  affirm  that  the  quantity 
of  the  product  is,  in  its  turn,  determined  by  the  income.  In  actual  fact,  this 
vicious  circle  does  not  exist,  for  the  quantity  of  the  product  is  not  deter- 
mined by  the  quantity,  but  by  the  existence  of  the  income  ;  so  that  the 
phenomenal  series  is — income,  quantity  of  product,  quantity  of  income. 


194  The  Econoinic  Synthesis 

the  maximum  income,  gives  also  the  maximum  unitary 
product  {that  is  to  say,  the  maximum  product  for  each  unit 
of  capital  and  labour  employed)  and  the  maximum  gross 
product,  the  income  cannot  increase  except  in  virtue  of 
methods  which  increase  at  the  same  time  both  the  gross  pro- 
duct and  the  unitary  product ;  so  that  all  conflict  between 
product  and  income  is  eliminated  a  priori. 

It  may  happen,  however,  that  the  maximum  income  coincides 
with  the  maximum  unitary  product,  but  not  with  the  maxi- 
mum gross  product ;  and  in  this  case  income  cannot  attain 
the  maximum  figure  without  restricting  the  gross  product  below 
the  maximum.  Now  the  restriction  of  the  gross  product,  the 
unitary  productivity  of  capital  and  labour  remaining  constant, 
evidently  involves  a  reduction  in  the  number  of  the  labourers 
employed  ;  and  in  such  a  case,  therefore,  the  elevation  of  the 
income  to  the  maximum  can  be  obtained  only  by  leaving 
unoccupied  a  part  of  the  labourers  who  would  otherwise  have 
been  employed.  Since  it  is  in  the  interest  of  society  that  the 
whole  of  the  population  fit  for  labour  should  be  employed  and 
should  furnish  the  maximum  total  product,  income  here  has 
an  interest  which  is  opposed  to  the  well-being  of  society. 

Finally,  it  may  happen  that  the  maximum  income  coincides 
neither  with  the  maximum  gross  product  nor  with  the  maxi- 
mum unitary  product ;  and  in  this  case  income  can  attain  its 
maximum  only  by  methods  which  restrict  ahke  the  gross 
product  and  the  unitary  product  below  the  maximum. — ^Now 
it  is  quite  true  that,  in  such  conditions,  the  restriction  of 
the  gross  product  cannot  involve  the  leaving  unoccupied  of  a 
part  of  the  population  ;  but  since  the  interest  of  society 
demands  that  labour  shall  furnish  the  maximum  unitary 
product  and  the  maximum  total  product,  in  these  condi- 
tions also  the  advantage  of  income  is  opposed  to  that 
of  society.  * 

^  It  follows  from  this  that  an  economic  policy  truly  inspired  by  the  interest 
of  society  must  have  as  its  aim  the  furnishing  of  the  maximum  total  product 
(and  such  is  the  contention  of  Adam  Smith,  loc.  cit.,  p.  299  ;  Say,  TraiU, 
pp.  396,  et  seq.;  Sismondi,  Nouveaux  Principes,  II,  pp.  329,  et  acq.) ;  whereas 
Ricardo  {loc.  cit.,  p.  210)  and  all  his  followers,  since  they  consider  the  maximum 
income  to  be  the  objective  of  economic  policy,  place  the  interest  of  the 
recipients  of  income  before  that  of  the  collectivity.  It  is  true  that  in  the  days 
of  Ricardo  the  interests  of  the  collectivity  demanded  that  there  should  be 
the  greatest  possible  elasticity  of  the  productive  forces,  that  is  to  say  that 
there  should  be  furnished  the  maximum  unitary  product  even  at  the  cost 


The  Quantity  of  Income  195 

Thus  there  are  cases  in  which  the  restriction  of  the  gross 
product  below  the  maximum,  whether  or  not  accompanied  by 
the  restriction  of  the  unitary  product,  increases  the  total 
income.  Now,  in  such  conditions,  income,  the  arbiter  of 
production,  has  an  interest  in  the  restriction  of  the  gross 
product,  and  it  may  be  in  the  restriction  of  the  unitary 
product,  below  the  maximum,  thus  preventing  the  prevaiHng 
form  of  the  coercive  association  of  labour  from  furnishing  all 
the  product  of  which  it  is  capable,  or  from  attaining  the  Hmit 
of  its  virtual  productivity.  And  since  income  is  limited  in 
quantity  by  the  negative  influences  of  the  coercive  association 
of  labour,  income  does  not  hesitate  to  seize  the  opportunity 
thus  offered  of  enlarging  itself  to  the  detriment  of  production, 
so  that  the  restriction  of  the  effective  productivity  below  the 
virtual  productivity  becomes  universal  and  unavoidable.  Thus, 
owing  to  the  fundamental  coercion  of  associated  labour,  a 
conflict  of  interests  becomes  estabHshed  within  the  very 
sphere  of  production. 

The  restriction  of  the  product  may  give  rise  to  an  increase 
in  the  income  in  three  distinct  ways,  through  influencing  the 
production,  through  influencing  the  circulation,  or  through 
influencing  the  distribution,  of  wealth. 

(1).  Influences  Acting  upon  Production. 

An  immediate  increase  in  income  may  be  effected  by  methods 
which  diminish  the  product  (and  the  income  itself)  in  the 
future. — We  have  a  typical  example  of  this  in  deforestation, 
which  increases  the  immediate  income  (though  the  increment 
may  be  said  to  be  fictitious,  since  it  is  in  fact  consumption  of 
capital)  of  sylvan  industry,  by  compromising  or  altogether 
annulling  the  future  product  (and  the  future  income).  The 
same  may  be  said  of  methods  of  culture  that  exhaust  the  soil, 
since  these  produce  the  like  result.    This  series  of  phenomena 

of  the  restriction  of  the  gross  product  below  the  maximum  ;  and  this  is  why 
the  poUtico-economical  aim  of  the  maximum  gross  product  which  dominated 
the  preceding  centuries  is  now  for  the  first  time  superseded  by  the  politico- 
economical  aim  of  the  maximum  income,  which  generally  involves  the  maxi- 
mum unitary  product.  Michlachewski  ingeniously  draws  attention  to  the 
succession  of  these  two  forms  of  economic  policy,  destined,  in  his  view,  to 
be  soon  superseded  by  a  higher  policy,  that  of  the  maximum  wage,  which  is 
already  tentatively  enunciated  in  the  United  States  [Exchange  and  Political 
Economy,  pp.  472-3]. 


196  The  Economic  Synthesis 

is  irrational  and  inadmissible  in  the  coUectivist  form  of  income 
(which  must  not  be  confounded  with  state  ownership  in  a 
capitalist  regime — usually  inspired  by  short-sighted  fiscal  aims), 
for  in  this  form  of  income,  the  owner  of  the  income,  the 
state,  represents  both  the  present  members  of  the  community 
and  their  descendants,  and  therefore  cannot  consent  to  adopt 
methods  that  will  enlarge  the  present  income  at  the  expense 
of  the  income  of  some  subsequent  date.  But  such  a  practice  is 
perfectly  admissible  in  all  the  other  forms  of  undifferentiated 
income  ;  and  it  need  hardly  be  said  that  it  is  found  to  be  more 
completely  developed  in  all  the  phases  of  differentiated  income. 

(2).  Influences  Acting  upon  Circulation. 

Every  restriction  of  the  product  which  increases  the  unitary 
value  of  tkat  product  may  increase  income,  or  at  least  the 
income  of  the  producer,  undoubtedly  effecting  a  corresponding 
diminution  in  the  income  of  the  consumer.  Such  is  the  everyday 
practice  of  monopoHst  producers,  who  restrict  the  production 
and  the  supply  of  their  commodity  in  such  a  way  as  to  obtain 
the  value  which  will  secure  to  them  the  maximum  income. — 
It  is  true  that  in  such  conditions  there  may  well  be  a  restriction 
of  the  production  of  a  given  commodity,  yet  not  necessarily  a 
restriction  of  the  total  production  ;  for  there  is  nothing  to 
prevent  the  capital  and  the  labour  that  are  withdrawn  from 
the  production  of  the  monopoHst  commodity  from  devoting 
themselves  to  the  production  of  other  commodities.  But  if 
the  restriction  of  the  product  is  obtained  by  means  of  the 
suppression  of  part  of  the  commodity  already  in  existence,  or 
without  any  reduction  of  the  capital  and  labour  employed,  or 
simply  by  employing  this  capital  and  this  labour  less  efficiently 
and  less  productively,  there  results  a  diminution  of  the  total 
product.  Where,  moreover,  the  restriction  of  the  product  is 
effected  by  means  of  a  restriction  in  the  capital  and  labour 
employed,  if  the  monopoHst  commodity  be  subject  to  the  law 
of  increasing  returns,  whilst  the  commodity  to  whose  produc- 
tion the  displaced  capital  and  labour  devote  themselves  be 
subject  to  the  law  of  diminishing  returns,  the  restriction  of  the 
production  of  the  first  commodity  necessarily  induces  a 
diminution  in  the  productivity  of  labour,  or  a  worsening  in 
the  general  conditions  of  production. 


The  Quantity  of  Income  197 

It  is  quite  obvious  that  this  method  of  increasing  income  is 
altogether  inconceivable  in  the  first  form  of  undifferentiated 
income,  in  the  communistic  economy.  It  might  indeed  be 
admitted  that  a  productive  community  could  restrict  the 
production  of  the  objects  which  it  sells  to  another  collectivity, 
in  order  to  increase  their  price,  and  therewith  its  own  income  ; 
but  such  a  case  is  in  reality  exceptional ;  and  it  will  be  ex- 
cluded a  'priori  if  we  take  for  examination  an  isolated  state. 
If  then,  we  put  aside  from  consideration  international  relation- 
ships, the  very  intrinsic  conditions  of  the  communistic  economy 
exclude  the  possibility  of  increasing  income  by  restricting  the 
product.  In  fact,  even  if  we  suppose,  in  this  form  of  economy, 
that  production  is  entrusted  to  individuals,  it  is  certain  that 
the  collectivity  as  owner  wiU  intervene  to  forbid  any  act  of 
monopolisation  by  individual  members  ;  and  if  monopoly  is 
excluded,  it  is  no  longer  possible  for  the  producer  to  increase 
value  and  income  by  restricting  supply  and  production.  If, 
moreover,  the  collective  entity  concentrates  in  its  own  hands 
the  direction  of  the  productive  enterprise,  the  deliberate 
restriction  of  production  in  order  to  raise  the  value  of  the 
products  can  never  occur  ;  for,  by  acting  in  such  a  way,  the 
community  would  inflict  an  injury  upon  a  part  of  its  own 
members,  by  depriving  them  of  the  possibihty  of  obtaining  a 
product  desired  by  them.  Hence,  in  such  conditions,  all  the 
products  must  be  sold  at  a  price  determined  by  the  cost  of 
production,  and  no  increase  of  income  can  be  brought  about  by 
limiting  supply  and  production.  Again,  if  certain  products 
are  obtained  at  an  increasing  cost,  the  productive  collectivity 
does  not  sell  them  at  maximum  cost,  but  simply  at  the  average 
cost,  determining  the  unitary  value  in  accordance  with  the 
quotient  obtained  by  dividing  the  total  cost  by  the  total 
number  of  the-  units  produced  ;  for  in  this  way  it  renders  these 
products  available  to  the  maximum  number  of  consumers  ; 
whereas,  by  selling  them  at  maximum  cost,  it  would  prevent 
their  purchase  by  consumers  less  weU-ofif  or  more  parsimonious.  * 

^  Bourguin,  loc.  cit.j  pp.  39,  et  seq.,  points  out  in  this  connexion  that  the 
sale  at  average  cost  of  production  of  products  obtained  at  a  rising  cost,  by 
increasing  the  demand  for  these,  claims  for  employments  characterised  by 
diminishing  productivity,  capital  and  labour  which  could  otherwise  be  em- 
ployed without  any  relative  decrease  of  the  product;  that  is  to  say,  it  in- 
volves a  sterilisation  of  productive  forces.  Oswalt  makes  the  same  affirmation 
(Vortdge  iiber  wirtachaftliche  Grundbegriffe,  Jena,  1905,  pp.  107-8),  and  the 


igS  The  Economic  Synthesis 

Therefore,  in  such  conditions,  not  only  is  absolute  monopoly 
impossible,  but  also  relative  monopoly,  or  the  privileged 
position  dependent  upon  more  advantageous  conditions  of 
productivity;  and  the  production  of  the  various  com- 
modities is  restricted  only  by  the  desires  and  the  needs  of 
the  consumers. 

But  directly  we  pass  from  the  communistic  economy,  we  find 
that  in  all  the  forms  of  undifferentiated  income  it  is  possible 
to  raise  the  figure  of  the  income  by  means  of  an  artificial 
elevation  in  the  price  of  the  products,  or  by  a  correlative 
restriction  of  supply  and  of  production. — ^In  fact,  a  craft-guild 
or  a  society  for  co-operative  production  which  possesses  a 
productive  monopoly  is  able  to  restrict  the  quantity  of  the 
product  in  such  a  way  as  to  obtain  the  price  which  yields  the 
maximum  income.  This  may  be  effected,  either  by  restricting 
the  amount  of  work  assigned  to  each  member,  or  by  restricting 
the  number  of  the  members,  or  by  forbidding  the  admission  of 
new  members,  as  soon  as  production  reaches  the  level  deter- 
mined by  these  considerations.  Thus  the  undifferentiated 
income  is  increased  by  influencing  circulation  through  a 
restriction  of  the  product. 

The  same  may  be  said  of  a  consumers'  co-operative  society  ; 
for  this  can,  within  certain  limits,  reduce  the  quantity  of  the 
products  in  which  it  deals  below  the  possible  maximum,  even 
where  it  does  not  possess  the  monopoly  of  their  sale.  In  fact,  if 
a  consumers'  co-operative  society  has  to  compete  with  capitalist 
undertakings  only,  it  can  sell  its  goods  at  the  current 
price  asked  by  these  undertakings,  instead  of  selling  them  at 
cost,  and  may  thus  increase  its  own  income,  without  the 
capitalist  competitors  being  able  to  do  anything  to  hinder  this. 
Now  a  consumers'  co-operative  society  which  selfe  at  current 

present  writer  sustains  the  identical  thesis  in  his  Analisi,  I,  p.  570.  But  these 
considerations,  which  are  certainly  irrefutable,  do  not  affect  the  fact  that  the 
sale  at  average  cost  of  production  renders  the  products  concerned  accessible 
to  persons  who  would  otherwise  have  to  do  without  them  ;  and  it  follows 
from  this  that  even  if  a  diminution  in  the  productivity  of  labour  be  involved, 
there  is  nevertheless  a  social  advantage.  In  any  case,  if  it  is  certain  that,  by 
selling  at  average  cost  of  production,  the  collectivist  economy  reduces  the 
total  product  below  the  maximum,  it  is  necessary  to  add  that  this  reduction 
is  never  a  source  of  income  ;  and  herein  lies  the  fundamental  difference 
between  the  communistic  economy  and  the  other  forms  of  income,  undiffer- 
entiated or  differentiated. 


The  Quantity  of  Income  199 

price  (we  assume,  for  the  sake  of  simplicity,  that  it  sells  only 
to  its  own  members),  subsequently  distributing  the  profit 
among  the  members  in  proportion  to  the  amount  of  their 
purchases,  immediately  restricts  the  demand  for  its  goods 
below  that  which  would  exist  if  these  were  sold  at  cost  price. — 
If  the  initial  diminution  in  the  demand  is  less  than  propor- 
tional to  the  increase  in  the  price,  if,  that  is  to  say,  the  members 
primarily  devote  to  the  purchase  of  the  product  thus  increased 
in  price  a  greater  quantity  of  money,  they  end  by  obtaining, 
thanks  to  the  employment  of  the  subsequent  reimbursements 
of  their  co-operative  profits,  a  larger  quantity  of  product  than 
that  which  corresponds  to  the  falling  off  in  their  primary 
demand  ;  and  therefore  the  total  quantity  of  product  pur- 
chased by  them  is  increased.  If  the  diminution  in  the  initial 
demand  is  exactly  proportional  to  the  increase  in  the  price, 
if,  that  is  to  say,  the  members  primarily  devote  to  the  purchase 
of  the  product  an  invariable  quantity  of  money,  whatever 
may  be  the  unitary  price  of  the  product,  they  end  by  obtaining, 
thanks  to  the  employment  of  the  subsequent  reimbursements 
of  their  co-operative  profits,  a  quantity  of  product  equivalent 
to  the  falling  off  in  their  primary  demand  ;  and  therefore  the 
total  quantity  of  product  purchased  by  them  is  ultimately 
unaffected.  But  if  the  diminution  in  the  demand  is  more  than 
proportional  to  the  increase  in  price,  if  the  rise  in  price  leads 
the  members  to  employ  in  their  initial  purchase  of  the  pro- 
duct a  lesser  quantity  of  money,  then,  even  if  they  devote 
their  reimbursed  profits  to  the  purchase  of  a  further 
quantity  of  the  product,  they  can  never  effect  purchases  to 
make  up  the  total  to  that  quantity  which  they  would  have 
procured  had  the  product  been  sold  in  the  first  instance  at  cost. 
In  such  a  case,  therefore,  the  sale  at  current  price  has  effectively 
diminished  the  quantity  of  products  sold  ;  that  is  to  say,  the 
co-operative  society  increases  its  own  income  by  restricting 
below  the  maximum  the  quantity  of  products  which  it 
sells. 

Thus,  for  example,  let  us  suppose  that  a  co-operative  society, 
by  selHng  at  cost  price  of  5  francs,  can  sell  10,000  units  of  the 
product,  thus  receiving  50,000  francs,  which  exactly  repay 
the  cost ;  but  that  by  selling  at  the  advanced  price  of  10  francs, 
it  can  sell  a  quantity  proportionately  less,  or  5000  units,  for 


200 


The  Economic  Synthesis 


which  it  obtains  50,000  francs,  realising  a  profit  of  25,000 
francs.    In  this  case  : 


12,500 

»  IxxvyXJi 

UUIXI.     Kt\J     tJ\J 

1,250 

J              j» 

6,250 

,, 

,, 

625 

>>              > 

3,125 

J, 

jj 

312-5 

>>              > 

1,562-5 

iy 

»» 

156-25 

>>              > 

781-2 

if 

>> 

78-12 

390-5 

» 

5» 

39-05 

»» 

195-3 

tf 

19-53 

97-6 

ti 

,^ 

9-76 

48-8 

>> 

,, 

4-88 

>>              > 

24-4 

,, 

2-44 

>>              > 

12-2 

>> 

>> 

1-22 

61 

J» 

0-61 

J. 

3 

a 

»» 

0-30 

» 

1-5 

j> 

J> 

0-15 

»» 

etc. 

etc. 

100,000  francs 

total 

price 

realised. 

10,000  units  total  quantity  bought. 

Hence  the  co-operative,  seUing  at  current  price,  ends  by  dispos- 
ing of  a  quantity  of  product  equal  to  that  which  it  could  have 
sold  at  cost  price.  But  let  us  suppose  that,  selling  at  the  price 
of  10  francs,  the  co-operative  could  dispose  only  of  a  more 
than  proportionally  smaller  quantity  of  product,  for  example, 
4000  units,  for  which  it  would  receive  40,000  francs,  realising 
a  profit  of  20,000  francs.  This  20,000  francs,  distributed 
among  the  members,  would  enable  them  to  buy  2000  additional 
units  of  the  commodity,  and  so  on.    The  result  would  be  : 

40,000  frs.,  with  which  are  purchased  4,000  units,  furnishing  a  profit  of 


20,000  frs. 

j> 

,, 

2,000 

10,000 

»» 

»» 

i 

1,000 

6,000 

>» 

J5 

600 

2,600 

»> 

250 

1,260 

»> 

»> 

125 

626 

>> 

62-5 

312-5 

,, 

31-26 

156-25 

>> 

,, 

15-625 

78-125 

>> 

,, 

7-81 

390625 

»» 

,, 

3-906 

19-5312 

tj 

yt 

1-96 

9-76 

yt 

»» 

0-97 

etc. 

etc. 

Total  80,000  frs. 

Total  8,000  units. 

Thus  the  co-operative  society  distributing  its  profits  among 
the  members  succeeds  in  seUing  no  more  than  8000  units  of  its 
product,  or  2000  less  than  it  could  have  sold  at  cost  price. 

In  the  economy  of  undifferentiated  income  there  may  there- 
fore arise  a  conflict  between  product  and  income,  or,  in  other 


The  Quantity  of  Income  201 

words,  it  may  happen  that  income  is  increased  by  means  which 
diminish  the  product. — But  this  series  of  phenomena  manifests 
itself  to  a  much  more  notable  extent  in  the  case  of  differentiated 
income,  and  above  all  in  those  forms  and  kinds  of  differentiated 
income  in  which  monopoly  is  more  general  and  more  intense. 
Thus,  while  in  modern  Greece  a  part  of  the  grape  harvest  is 
often  destroyed  in  order  to  put  up  the  price,  in  the  United 
States  many  industrial  combines  buy  inventors'  patents  with 
the  sole  object  of  keeping  them  out  of  the  hands  of  their  com- 
petitors, and  without  making  use  of  the  inventions  themselves 
for  many  years.  For  example,  the  Edison  phonograph,  when 
first  invented,  has  one  application  only  in  commercial  enter- 
prise, as  a  means  of  communication  and  information ;  for  the 
combine  which  has  bought  it  from  the  inventor  will  neither  allow 
others  to  undertake,  nor  will  itself  undertake  on  its  own  initia- 
tive, the  other  applications  of  which  it  is  susceptible.*  Now 
there  is  here  a  case  of  increase  of  income  dependent  upon  a  re- 
striction in  the  quantity  of  the  product,  whereby  the  price  of 
that  product  is  kept  at  a  high  level.  Such  a  practice  finds  a 
much  wider  application  in  the  railway  transport  industry,  which 
is  pre-eminently  monopolist  in  character.  In  fact,  the  com- 
panies, or  the  state,  which  both  alike  carry  on  this  industry 
on  essentially  capitalist  principles,  raise  the  rates  to  that  level 
which  will  secure  the  maximum  net  income,  thus  diminishing 
the  number  of  services  supphed  and  demanded  below  the 
maximum  which  would  be  obtained  if  the  rates  were  simply 
commensurate  to  the  cost  of  the  services.  It  is  estimated  that 
in  Prussia,  where  the  railways  are  all  owned  and  controlled 
by  the  state,  the  rate  of  transport  per  ton  or  per  kilometre, 
according  to  the  existing  tariffs,  is  2J  times  the  actual  cost ; 
so  that,  to  secure  the  maximum  product,  or  the  maximum 
sum  of  railway  services,  it  would  be  necessary  to  reduce  the 
tariffs  to  \  of  their  present  figure. — ^Thus  the  railway  industry 
restricts  the  tariff  in  order  to  increase  the  income  ;  and  this 
occurs  to  an  even  more  considerable  extent  where  the  railways 
are  privately  owned.  ^ 

*  Janschull  [Industrial  Combines],  Petersburg,  1895,  p.  407. 

*  Sax,  Verkehrsmittel,  I,  pp.  82,  et  seg.  ;  Launhardt,  Tariffe  ferroviarie, 
"  Biblioteca  dell'  Economista  " ;  Ulrich,  Teoria  delle  tariff e  ferroviarie,  ibid. ; 
Aoworth,  Elements  of  Railway  Economics,  Oxford,  1905  ;  Flora,  La  politica 
delle  tariff e  ferroviarie,  Naples,  1907,  pp.  107-118. 


202  The  Economic  Synthesis 

But  in  these  practices,  which  aim  at  the  increase  of  income 
by  the  restriction  of  the  product,  income  not  infrequently 
enjoys  the  support  of  the  state  ;  as  is  the  case,  for  example, 
when  there  are  protective  duties  which,  by  diminishing  the 
productivity  of  labour,  increase  the  value  of  the  product,  and 
therewith  increase  income,  or  certain  kinds  of  income. 

(3).  Influences  Acting  upon  Distribution. 

The  processes  hitherto  examined  for  the  increase  of  income 
at  the  cost  of  the  product  are  possible  and  efficacious  only  when 
their  application  is  circumscribed  to  a  single  product  or  group 
of  products  ;  for,  if  they  were  generahsed  throughout  all  the 
fields  of  production,  they  could  not  raise  the  value  of  the 
products,  and  therefore  could  not  increase  income.  They  have 
therefore,  a  vast  sphere  of  appHcation  in  time,  in  so  far  as  they 
occur  in  the  most  varied  forms  of  income,  but  their  apphca- 
tion  in  space  is  an  extremely  restricted  one,  in  so  far  as  they 
occupy  a  circumscribed  zone  in  the  field  of  production  ;  more- 
over, they  raise  individual  income,  but  not  total  income.  Very 
different,  on  the  other  hand,  are  those  processes  which  raise 
income  at  the  cost  of  the  product  by  influencing  distribution  ; 
for  these  are  perfectly  efficacious  even  when  generahsed  to  all 
products  ;  and,  even  when  appHed  to  a  part  only  of  pro- 
ductions, they  raise,  not  only  the  individual  income,  but  also 
the  total  income  ;  yet  these  are  possible  only  in  certain 
historic  forms  of  income,  that  is  to  say,  their  sphere  of  activity 
is  vaster  in  space,  but  more  circumscribed  in  time. 

Considering  first  of  all  undifferentiated  income,  we  find  that 
the  association  of  labour  proceeds  until  that  point  is  attained 
beyond  which  the  addition  of  a  new  labourer  effects  no  more 
than  a  proportional  increase  in  the  product.  In  fact,  in  such 
conditions,  subsistence  being  equal  to  the  product  of  isolated 
labour,  and  therefore  constant,  the  numerical  increase  of  the 
associated  labourers  increases  the  unitary  income  in  so  far  as  it 
increases  the  unitary  product.  It  is  to  the  interest,  therefore, 
of  the  producers  to  extend  the  association  of  labour  only  in  so 
far  as  they  derive  from  that  extension  an  increment  of  the 
unitary  product,  that  is  to  say,  an  increase  more  than  pro- 
portional to  the  total  product ;  so  that,  as  soon  as  the  new 
labourers  affiliated  to  the  association  increase  the  product 


The  Quantity  of  Income  203 

only  to  a  proportional  extent,  there  ceases  to  exist  any 
economic  reason  for  their  affiliation,  and  it  is  necessary  for  the 
new  labourers  to  found  new  productive  associations,  which 
will  in  their  turn  extend  up  to  the  point  at  which  the  affiliation 
of  new  producers  effects  no  more  than  a  proportionate  increase 
in  the  product. 

Hence,  in  the  case  of  undifferentiated  income,  the  associa- 
tion of  labour  extends  until  that  point  is  reached  at  which  any 
further  extension  would  not  give  rise  to  any  increase  in  the 
productive  efficiency  of  labour.  The  same  may  be  said  of  the 
employment  of  technical  capital ;  for  this,  in  the  case  of 
undifferentiated  income,  is  saved  and  employed  as  long  as  it 
increases  the  unitary  product. — ^In  fact,  every  replacement  of 
the  workers  by  technical  capital,  or  every  employment  of 
new  technical  capital,  which  increases  the  unitary  product, 
increases  'per  se  (the  subsistences  being  constant)  the  unitary 
income,  and  is  therefore  to  the  interest  of  all  the  associated 
producers.  Thus  the  association  of  labour  and  the  employ- 
ment of  technical  capital  proceed,  in  this  form  of  income,  up 
to  the  point  at  which  they  endow  labour  with  the  maximum 
unitary  productivity  ;  that  is  to  say,  human  labour  (leaving 
out  of  consideration  the  limits  inherent  in  the  fundamental 
coercion  to  the  association  of  labour  and  in  the  other  influ- 
ences previously  recorded)  attains  the  maximum  unitary 
productivity  compatible  with  the  prevaiHng  conditions  of 
technique. 

Finally,  in  these  conditions,  there  is  obtained,  not  only  the 
maximum  unitary  product,  but  also  the  maximum  total 
product,  compatible  with  the  conditions  of  technique.  This 
results  from  the  fact  that  in  this  form  of  income  the  whole 
population  is  productively  employed,  so  that  the  maximum 
unitary  product  necessarily  involves  the  maximum  total 
product.  Certainly  it  is  always  possible  that,  in  a  given 
industry,  the  replacement  of  a  given  number  of  labourers 
by  a  technical  capital  which  undergoes  little  or  no  wear  in 
use,  may,  while  increasing  the  product  or  the  unitary  income, 
diminish  the  gross  product.  But  the  workers  who,  in  this 
determinate  industry,  are  replaced  by  technical  capital,  must 
find  independent  employment  in  another  industry,  since  only 
on  this  condition  does  undifferentiated  income  persist ;    and 


204  The  Economic  Synthesis 

therefore  the  total  mass  of  products  increases  in  every  case. — 
If  follows  from  this  that  undifferentiated  income  always 
obtains  the  maximum  unitary  product  and  the  maximum  total 
product  compatible  with  the  prevaihng  conditions  of  technique. 

This  conclusion  is  no  longer  irrefutable  when  there  is 
attained  that  limit  of  demographic  and  economic  saturation 
in  which  there  no  longer  exists  a  single  available  strip  of 
cultivable  land.  In  fact,  in  such  conditions,  the  new  additions 
to  the  population,  where  they  are  not  employed  by  the  associa- 
tions already  existing,  find  it  impossible  to  found  new  associa- 
tions on  their  own  account,  and  are  constrained  to  sell  their 
labour,  in  exchange  for  a  bare  subsistence,  to  the  members  of 
the  existing  associations.  Thereupon  undifferentiated  income 
disappears  to  give  place  to  differentiated  income.  If,  as  is  by 
hypothesis  the  case,  undifferentiated  income  persists,  this  is 
because  the  new  labourers  who  are  superadded  are  affihated  to 
the  existing  associations  despite  the  fact  that  they  increase 
the  product  only  in  a  measure  proportional  or  less  than  pro- 
portional. Therefore,  in  such  conditions,  the  unitary  pro- 
ductivity of  labour  declines  in  proportion  as  the  association 
of  labour  extends,  that  is  to  say,  it  diverges  to  an  ever  greater 
degree  from  the  ideal  maximum  which  corresponds  to  the 
prevailing  conditions  of  technique.  Moreover,  if  the  unitary 
product  decreases,  the  absolute  product  increases ;  and 
therefore,  in  such  conditions  also,  undifferentiated  income,  if 
it  does  not  give  the  maximum  unitary  product,  still  gives  the 
maximum  total  product.  For  the  rest,  these  conditions  of 
extreme  demographic  congestion  do  not  correspond  to  the 
reality  of  past  or  present  times,  nor  even  to  that  of  any  future 
that  can  be  definitely  foreseen,  and  they  are  therefore  com- 
pletely outside  the  sphere  of  positive  investigation. 

In  the  case  of  differentiated  income,  on  the  other  hand,  the 
converse  phenomena  occur. — ^In  fact,  in  such  conditions,  in 
which  subsistences  may  be  (as  we  shall  show  more  clearly 
later)  inferior  to  the  product  of  isolated  labour  and  therefore 
variable,  it  may  happen  that  the  increase  in  the  number  of 
associated  producers  increases  the  sum  of  the  subsistences  in 
equal  measure  with,  or  in  greater  measure  than,  the  product, 
that  is  to  say,  it  leaves  the  income  unchanged,  or  diminishes 
it.    Now,   in    this   last    case,  that    productive    combination 


The  Quantity  of  Income  205 

which  gives  the  maximum  unitary  product,  gives  an  in- 
come inferior  to  the  maximum  ;  that  is  to  say,  it  is  to  the 
interest  of  income  to  confine  the  association  of  labour  within 
that  point  at  which  labour  attains  the  maximum  productivity. 
— Thus,  for  example,  if  hitherto  there  have  been  engaged  10 
workers  to  produce  120  measures,  and  now  there  are  engaged 
12  to  produce  160,  the  unitary  productivity  increases  from  12 
to  13-3  ;  but  if  the  individual  wage  rises  (precisely  because 
the  number  of  unemployed  persons  diminishes),  from  5  to  10, 
for  example,  the  income  diminishes  from  70  to  40. — ^There- 
fore, in  this  case,  income  refuses  to  increase  the  number  of  the 
workers  from  10  to  12,  refuses,  that  is  to  say,  to  extend  the 
association  of  labour  up  to  the  point  at  which  labour  attains 
the  maximum  productivity.  Conversely,  it  may  happen  that 
the  diminution  in  the  number  of  associated  workers  (by 
increasing  the  number  of  the  unemployed)  diminishes  sub- 
sistences in  a  greater  measure  than  product,  and  therefore 
raises  the  income  ;  and  in  such  a  case  income  diminishes  the 
number  of  workers  employed,  or  enforces  upon  the  association 
of  labour  a  restriction  which  diminishes  the  productivity  of 
labour. 

The  employment  of  technical  capital  which  increases  the 
product  and  the  unitary  income  may  exhibit,  in  this  respect, 
just  as  much  as  the  extension  of  the  association  of  labour,  an 
opposition  to  the  interests  of  differentiated  income.  In  fact, 
the  significant  matter  in  this  economic  form  is  not  the  quantity 
of  unitary  income,  or  the  quotient  obtained  by  dividing  the 
total  income  by  the  number  of  the  labourers,  but  the  quantity 
of  total  income  available  for  the  recipients  of  income  ;  and 
this  quantity  may  very  well  diminish  while  the  unitary 
product  and  the  unitary  income  increase.  Thus,  if  a 
certain  number  of  workers  be  replaced  by  a  technical 
capital  (of  zero  wear)  equivalent  to  their  subsistences,  which 
diminishes  the  total  product  in  a  greater  measure  than  the 
quantity  of  the  subsistences  replaced,  the  product  and  the 
unitary  income  (that  is  to  say  the  income  per  labourer  em- 
ployed) may  certainly  increase,  in  consequence  of  the  diminu- 
tion in  the  number  of  the  workers  employed,  but  the  total 
incomes  diminishes.  For  example,  if  hitherto  100  workers, 
requiring    100  subsistences,  have  furnished  a  product   200, 


2o6  The  Economic  Synthesis 

whereas  now  50  workers  with  50  subsistences  and  a  tech- 
nical capital  of  zero  wear  amounting  to  50  produce  140, 
the  unitary  product  increases  from  2  to  2.80,  the  unitary 
income  increases  from  1  to  1-80,  but  the  total  income  diminishes 
from  100  to  90.  Now  what  signifies  to  the  recipients  of  income 
is  not  the  unitary  product  or  the  unitary  income  but  the  total 
income  ;  and  since  this  diminishes,  they  have  no  interest  in  the 
employment  of  technical  capital.  This  is  why  it  is  that  a 
technical  capital  which  increases  the  unitary  product  and 
correlatively  the  unitary  income,  and  which  would  certainly  be 
employed  in  the  economy  of  undifferentiated  income,  is  not 
employed  in  the  economy  of  differentiated  income,  because  it 
diminishes  the  total  income  ;  that  is  to  say,  differentiated 
income  renders  impossible  the  adoption  of  an  improvement  in 
technique  which  would  increase  the  productivity  of  labour,  or, 
in  other  words,  the  productivity  of  labour  is  restricted  within 
the  maximum  which  it  might  attain.^ 

In  the  case  here  indicated  income  is  opposed  to  an  increase 
in  the  unitary  product  which  is  accompanied  by  a  diminution 
of  the  total  product. — But  the  case  may  arise  in  which  the 
total  product  equally  with  the  unitary  product  is  artificially 
restricted  by  the  influences  of  differentiated  income,  so  that 
income  increases  in  virtue  of  methods  which  diminish  the 
product.  We  see  this  every  day  in  capitaHst  home-industry, 
in  capitalist  petty  farming,  in  the  undertakings  in  which 
women  and  children  replace  adult  males,  and  generally  in 
those  forms  of  enterprise  which  the  Webbs  speak  of  as  parasitic, 
and  which  diminish  the  productivity  of  labour  and  the  product, 
but  by  depressing  wages  in  still  greater  proportion  increase  the 

*  Against  these  considerations  there  might  be  adduced  the  views  of 
Oswalt  {loc.  cit.,  pp.  109-10,  144),  who  points  out  that,  in  order  to  determine 
the  unitary  product,  we  ought  not  to  measure  the  product  in  relation  to  labour 
alone,  but  also  in  relation  to  teclmical  capital,  and  that,  if  we  do  this,  we  find 
that  the  replacement  of  the  workers  by  technical  capital  equivalent  to  these, 
when  it  diminishes  the  total  product,  diminishes  at  the  same  time  the  unitary 
product.  Thus,  in  the  example  given  above  the  unitary  product,  after  the 
machine  has  come  into  use,  will  not  be  V/=2'80,  but  ~fj=  1'40,  that  is  to 
say,  it  will  be  less  than  that  which  was  obtained  prior  to  the  introduction  of 
the  machine.  But  if  it  is  logical  that  such  a  writer  as  Oswalt,  who  posits  even 
differential  rent  among  the  elements  of  the  cost  of  production  (loc.  cit.,  p.  116), 
should  regard  the  accumulation  of  capital  as  a  cost  comparable  on  equal  terms 
with  labour,  it  is  no  less  logical  that  we,  who  cannot  accept  this  view,  should 
persist  in  measuring  the  productivity  of  associated  labour  solely  by  compar- 
ing each  with  the  other  the  product  and  the  labour  employed. 


The  Quantity  of  Income  207 

income.  Here  income  increases  at  the  cost  of  the  product. 
But  such  a  phenomenon  may  also  arise  independently  of  any 
involution  in  technique,  or  concomitantly  with  an  advance 
in  technique.  In  fact,  every  technical  improvement  which 
diminishes  the  product  in  less  degree  than  it  diminishes  the 
number,  and  consequently  the  total  subsistence,  of  the  workers 
employed,  increases  the  total  income,  and  is  therefore  in  the 
interest  of  income,  but  diminishes  the  total  product  of  the 
industry  concerned.  Hence  the  workers  replaced  by  the 
machine  cannot  find  productive  employment  unless  new 
capital  is  productively  saved,  so  that  it  may  very  well  happen 
that  the  diminution  of  the  product  in  that  particular  industry 
is  not  compensated  by  an  increase  of  product  in  some  other 
industry,  or,  in  other  words,  that  the  diminution  in  product 
is  a  general  one.  If,  then,  in  the  case  of  undifferentiated 
income,  every  technical  advance  which  increases  the  unitary 
product  and  the  unitary  income  increases  the  total  product,  in 
the  case  of  differentiated  income,  on  the  other  hand,  a 
technical  advance  which  increases  the  unitary  product,  the 
unitary  income  and  the  total  income,  may  diminish  the 
total  product ;  that  is  to  say,  the  increase  of  income  may  be 
obtained  by  methods  which  diminish,  not  merely  the  pro- 
duct of  one  particular  undertaking,  but  the  total  product  of 
society. 

Sometimes,  on  the  other  hand,  differentiated  income  in- 
creases, or  maintains  itself  at  the  maximum  figure,  no  longer 
by  diminishing  the  social  product,  but  by  impeding  its  increase. 
This  necessarily  happens  in  those  conditions  of  demographic 
congestion  to  which  we  have  previously  referred.  In  fact, 
since  in  such  conditions  the  employment  of  additional 
labourers  effects  a  very  trifling  increase  of  total  income,  or 
effects  no  increase  at  all,  the  recipients  of  income  refuse  to 
employ  any  additional  workers.  And  since,  in  the  supposed 
conditions,  there  are  no  available  lands  upon  which  the  incre- 
ments of  population  can  be  employed,  the  unwiUingness  of  the 
recipients  of  income  to  take  on  new  workers  for  the  under- 
takings already  in  existence  involves  the  irremediable  un- 
employment of  these  additional  workers  and  the  inevitable 
arrest  of  social  production.  This,  if  it  avoids  or  restricts  the 
diminution  in  the  unitary  product,  yet  brings  about  a  restric- 


2o8  The  Econmnic  SyntJiesis 

tion  of  the  total  product  below  the  Hmit  which  it  could  other- 
wise attain. 

But  in  addition  to  such  direct  influences,  income  may 
diminish  the  product  by  indirect  means,  that  is  to  say,  by  the 
reactions  which  the  practices  previously  studied  provoke  on 
the  part  of  the  labourers.  If,  indeed,  income  is  increased  by 
methods  injurious  to  labour,  labour  not  infrequently  reacts 
by  means  of  strikes,  or  by  obstructive  methods  such  as  the 
restriction  of  the  quantity  of  labour  furmshed  by  each  labourer 
{"  ca'  canny  "),  or  by  some  other  vexatious  interference  with 
the  progress  of  the  enterprise — ^practices  which  all  necessarily 
lead  to  a  restriction  of  the  product. — ^Now  if  income,  notwith- 
standing these  influences.,  maintains  itself  above  the  level  at 
which  it  would  have  become  estabHshed  in  the  absence  of  any 
practice  hostile  to  labour,  income  will  continue  to  employ  such 
methods  notwithstanding  the  reduction  in  the  product  to 
which  their  employment  gives  rise. 

These  manifestations  of  antagonism  between  product  and 
income  inherent  in  differentiated  income*  appear  with 
diminishing  intensity  in  the  successive  sub-forms  of  that 
income.  In  fact,  the  greater  the  technical  productivity  of 
labour,  the  greater  is  the  loss  of  product  dependent  upon  the 
influences  tending  to  limit  productivity,  and  hence  the  less 
probable  is  it  that  a  process  which  diminishes  the  productivity 
of  labour  wiU  succeed  in  increasing  income. — On  the  other 
hand,  the  greater  the  productivity  of  labour,  the  less  Hkely 
to  arrive,  or  the  more  remote,  is  the  moment  in  which  the 
increase  in  the  number  of  associated  labourers,  increasing  the 
unitary  product,  wiU  increase  the  total  product  in  a  ratio 
barely  equal  to  or  less  than  the  increase  of  the  subsistences, 

1  Pareto  (Coun  ^^eonomie  polUique,  IE,  pp.  92,  ei  seq.,  p.  179)  is  therefore 
wrong  in  affirming  that  the  enterprise  of  an  independent  producer,  and  the 
oommunistic  economy,  in  establishing  those  coefficients  of  manufacture  that 
produce  the  maximum  well-being  for  the  members,  arrive  at  the  same  co- 
efficients of  production  which  are  established  on  the  basis  of  free  competition 
in  an  individualistic  or  capitalist  economy.  The  truth  is  that  in  the  economy 
of  the  independent  producer  and  in  that  of  the  communistic  producer — sub- 
forms  of  undifferentiated  income — the  maximum  income  necessarily  coexists 
with  the  maximum  product,  whereas  in  the  capitalist  economy  (even  if  it  is 
founded  uf>on  free  comp>etition),  a  form  of  differentiated  income,  this  is  not 
the  case.  Therefore  the  enterprise  aiming  always  at  the  maximum  income  is, 
in  tiie  case  of  undifferentiated  income,  necessarily  organised  in  such  a  way  as 
to  obtain  the  maximtmi  product,  but  is  not  necessarily  thus  organised  in  the 
case  of  difier^itiated  income. 


The  Qita7ttity  of  Incofne  209 

and  will  therefore  fail  to  give  rise  to  an  increase  in  the  total 
differentiated  income.  Finally,  the  greater  the  productivity 
of  labour,  the  more  probable  is  it  that  a  process  increasing  the 
product  and  the  unitary  income  will  at  the  same  time  increase 
the  total  income,  and  therefore  redound  to  the  advantage  of 
the  recipient  of  income.  Hence  the  influences  just  studied 
(and  the  same  may  be  said  of  those  indicated  under  the  sub- 
headings ( 1)  and  (2) )  accentuate  the  advance  in  the  productivity 
of  labour  that  manifests  itself  in  the  successive  forms  of  in- 
come ;  so  that  these  forms,  as  well  as  exhibiting  an  increasing 
virtual  productivity  on  the  part  of  associated  labour,  manifest 
the  diminishing  power  of  income  to  reduce  the  effective  pro- 
ductivity of  associated  labour  below  its  virtual  hmit.  Now 
the  incessant  increase,  thus  determined,  in  the  productive 
efficiency  of  associated  labour,  is  such  as  to  outweigh  the 
progressive  decline  in  the  productivity  of  the  land  which 
necessarily  manifests  itself  in  every  successive  phase  of  income. 
Hence,  despite  this  countervailing  influence,  in  the  successive 
forms  of  income  the  relative  product  of  labour  presents  an 
incessant  increase. — ^This  is  true,  however,  only  in  the 
ascendent  phase  of  each  form  of  income  ;  for,  during  the 
declining  period,  in  each  successive  form,  there  becomes  con- 
tinually more  marked  the  diminution  of  the  virtual  produc- 
tivity of  associated  labour  and  the  reduction  (due  to  the 
influence  of  income)  in  its  effective  productivity  below  the 
virtual  limit ;  so  that  the  relative  product  of  labour  is  subject 
to  a  progressive  decline. 

Each  form  of  income  may  be  compared  to  a  receptacle, 
within  which  the  productive  forces  of  society  are  confined,  and 
within  which  they  undergo  elaboration  and  development  ;  but 
these  forces  can  only  develop  freely  to  the  degree  permitted  by 
the  limits  of  the  receptacle,  and  not  beyond.  No  doubt,  in 
every  successive  form  of  income,  the  confines  of  the  receptacle 
become  more  extended,  either  because  the  technical  or  virtual 
productivity  of  labour  becomes  greater,  or  because  the  influence 
of  income  in  depressing  the  effective  productivity  of  labour 
below  the  virtual  productivity  becomes  less  ;  hence,  in  the 
successive  forms  of  income,  the  productive  forces  can  develop 
with  increasing  efficiency.  Moreover,  in  every  form  of  income, 
during  its  ascendent  period,  the  hmits  of  the  receptacle  gradu- 


2IO  The  Economic  Synthesis 

ally  expand  until  a  maximum  is  attained,  this  expansion 
rendering  possible  a  concomitant  continuous  expansion  of 
the  productive  forces.  But  as  soon  as  the  maximum  has 
been  attained,  the  receptacle  progressively  contracts,  thereby 
bringing  about  a  corresponding  decline  in  the  productivity  of 
associated  labour.  Hence  the  progressive  phases  of  the  coercive 
association  of  labour  could  be  even  more  aptly  figured  as  an 
ascendent  series  of  parabolas,  in  each  of  which  the  productivity 
of  associated  labour  increases  up  to  a  certain  limit — ^higher  in 
each  phase  than  in  the  one  before — ^and,  having  attained  this 
limit,  declines. 

But  within  a  single  form  of  income,  the  different  kinds  of 
income  exercise  an  influence  which  diminishes  with  varying 
intensity  the  productive  potency  of  associated  labour.  Whilst 
it  is  true  that  income  sometimes  undergoes  an  increase  in 
virtue  of  methods  which  diminish  the  unitary  or  the  total 
product,  this  occurs  more  especially  and  with  greater  frequency 
in  certain  kinds  of  income,  and  above  all  in  the  income  derived 
from  the  rent  of  land — ^for  this  last  increases  as  a  rule  with 
every  decline  in  the  productivity  of  agricultural  labour  or 
of  its  product.  It  follows  from  this  that  those  forms  of 
industry  in  which  the  rent  of  land  prevails  are  subject  to 
a  restriction  of  production  more  frequent  and  more  intense 
than  occurs  in  other  forms  of  industry  in  which  other  kinds  of 
income  prevail ;  and  this  is  why  it  is  that  in  agriculture, 
processes  restricting  production  are  especially  prevalent.  For 
this  reason  also,  given  different  degrees  of  income,  that  degree 
in  which  land-rent  predominates  must  exercise  upon  produc- 
tion a  restrictive  influence  greater  than  that  exercised  by 
those  degrees  of  income  in  which  other  kinds  of  income  pre- 
dominate ;  and  given  two  countries,  in  one  of  which  rent  pre- 
dominates, and  in  the  other  profit,  in  the  former  there  must  be 
a  more  marked  inferiority  of  the  effective  productivity  of  labour 
in  relation  to  its  virtual  productivity.  Finally,  it  may  happen 
that  income  of  a  given  kind  may  be  increased  by  methods  which 
diminish,  not  only  the  total  product,  but  also  the  total  income. 

In  this  way  the  effective  productivity  of  associated  labour  is 
always  that  which  yields  the  maximum  income,  and  the 
effective  productivity  is  more  or  less  inferior  to  the  virtual 
productivity  according  as  the  income  is  differentiated  or  un- 


The  Quantity  of  Income  2 1 1 

differentiated,  according  as  the  form  of  income  is  less  or  more 
evolved,  and  according  as  land-rent  or  the  profit  of  capital 
predominates.  1 

II.  The  Wear  of  Technical  Capital. 

The  specific  product  of  associated  labour  contains  one 
portion  which  goes  to  redintegrate  the  quantity  of  technical 
capital  (necessary  to  institute  the  association  of  labour)  which 
undergoes  deterioration  in  the  process  of  production.  Now,  to 
ascertain  the  income,  it  is  evidently  necessary  to  subtract  this 
quantity  from  the  specific  product  from  associated  labour  ; 
and  the  income  will  therefore  be  greater  or  less  according  as 
this  quantity  is  more  or  less  considerable. 

III.    The    Product    of    Isolated    Labour. — The    Quantity    of 
Subsistence. — Struggle  Between  Subsistence  and  Income. 

In  the  conditions  hitherto  postulated,  in  which  income  is 
precisely  equal  to  the  specific  product  of  associated  labour, 
and  in  which  therefore  subsistence  is  equal  to  the  product  of 
isolated  labour  employed  with  a  unitary  technical  capital 
(allowance  being  made  for  the  wear  of  this) — ^the  quantity  of 
income  is  exclusively  determined  by  the  two  factors  previously 
indicated,  and  it  is  absolutely  independent  of  the  productivity 
of  isolated  labour  or  of  the  quantity  of  subsistence.  In 
fact,  in  such  conditions,  if  the  productivity  of  isolated 
labour  increases  or  diminishes,  there  increases  or  diminishes 
the  quantity  of  subsistence  ;  but  since  this  has  no  neces- 
sary influence  upon  the  productivity  of  associated  labour, 
it  cannot  have  any  effect  upon  the  absolute  quantity  of 
income. — But  it  may  happen  that  the  remuneration  of 
labour  expands  in  excess  of  the  product  of  isolated  labour, 
or  conversely  that  income  succeeds  in  restricting  the  re- 
muneration of  labour  to  less  than  the  product  of  isolated 
labour  ;  that  is  to  say,  it  may  happen  that  the  worker 
obtains  for  himself  a  part  of  the  product  of  associated 
labour,  or  that  income  obtains  a  part  of  the  product  of  isolated 

^  With  regard  to  the  further  complications  that  arise  out  of  the  antagonism 
between  product  and  income,  consult  the  present  writer's  Costituz.  ec.  odierna, 
pp.  51-3  ;  Effertz,  loc.  ciL,  pp.  254,  et  aeq. ;  Landry,  L'utiliU  aociale  de  la 
'pro'prUU  individuelle,  Paris,  1901,  pp.  1,  et  aeq. 


212  The  Economic  Synthesis 

labour  employed  with  a  correlative  technical  capital.  Now 
the  assignment  to  the  worker  of  a  part  of  the  product 
of  associated  labour  effects  no  more  than  the  distribution  of 
the  integral  income  between  two  participants,  the  labourer  and 
the  non-labourer,  without  in  any  way  affecting  the  total 
quantity  of  the  income  itself.  In  the  second  event,  on  the 
other  hand,  if  income  acquires  a  part  of  the  product  of  isolated 
labour,  the  part  thus  withdrawn  from  subsistence  is  practically 
transformed  into  income,  or  irrevocably  confounded  therewith. 
Hence,  in  such  conditions,  we  have  not  only  a  process  of 
distribution  or  redistribution  of  income,  but  further  a  positive 
increase  in  the  total  quantity  of  income,  which  expands 
beyond  its  natural  limits,  or  assumes  super-normal  dimensions. 
— ^The  process  here  is  analogous  to  that  to  which  we  referred 
in  an  earlier  chapter,  regarding  the  house  rented  to  the 
labourer.  ^  We  pointed  out  that  the  renting  of  the  house  to  the 
worker  involved  the  transference  of  a  part  of  the  wealth  from 
subsistence  to  income,  or  the  expansion  of  the  latter  at  the 
expense  of  the  former.  Now,  an  analogous  process  occurs  in 
the  more  general  case  in  which  a  part  of  the  product  of  isolated 
labour  is  taken  from  subsistence  for  the  benefit  of  income. 
There  is  this  difference,  however,  that  in  the  case  of  the 
dwelling  the  transference  of  a  part  of  subsistence  to  the 
domain  of  income  is  the  essential  condition  whereby  a  primary 
need  of  the  labourer  obtains  satisfaction  ;  whereas  in  the 
present  case  the  transference  of  a  certain  quantity  of  products 
from  subsistence  to  income  does  not  satisfy  any  individual 
need,  and  is  nothing  more  than  the  effect  of  economic  organisa- 
tion or  the  economic  struggle. 

Now,  when  subsistence  is  less  than  the  product  of  isolated 
labour,  the  total  quantity  of  the  income  may  change,  the 
specific  product  of  associated  labour  and  the  wear  of 
technical  capital  remaining  constant,  through  an  increase 
or  a  diminution  in  the  excess  of  the  product  of  isolated 
labour  over  the  quantity  of  that  product  assigned  to  the 
labourer ;  that  is  to  say,  the  total  quantity  of  income 
varies  with  every  variation  in  the  specific  product  of  isolated 
labour  and  in  the  quantity  of  the  product  assigned  to  the 
labourer  ;  that  is  to  say,  the  product  of  isolated  labour  remain- 

1  See  p.  62. 


The  Quantity  of  Income  2 1 3 

ing  constant,  the  total  quantity  of  income  varies  in  inverse 
ratio  with  the  quantity  of  subsistence. 

Now  the  very  structure  of  income  often  imposes  the 
reduction  of  the  quota  of  the  labourer  below  the  product 
of  isolated  labour.  For  the  coercion  impMcit  in  the  association 
of  labour  (in  addition  to  the  direct  action  of  income  itself) 
limits,  as  we  have  seen  before,  the  specific  product  of  associated 
labour,  and  theiewith  invites  income  to  expand  beyond  this 
measure  by  annexing  a  part  of  the  product  of  isolated  labour, 
or  by  reducing  subsistence  below  its  normal  dimensions.  Sub- 
sistence, in  its  turn,  being  thus  restricted,  reacts,  and  en- 
deavours in  every  possible  way  to  reattain  to  its  normal  level, 
or  even  to  rise  beyond  this,  by  annexing  a  part  of  income.  Thus 
the  very  limitation  of  the  product  which  arises  out  of  the 
fundamental  coercion  to  the  association  of  labour  creates  the 
platform  of  an  incurable  conflict  between  subsistence  and 
income. 

On  careful  examination,  the  same  conflict  may  be  detected 
in  the  case  of  undifferentiated  income  ;  only,  in  this  economic 
form,  it  develops  within  the  inner  and  silent  recesses  of  the 
consciousness  of  the  recipients  of  income,  behind  the  inacces- 
sible ramparts  of  their  minds,  and  not  in  the  public  arena  of 
economic  conflicts. — For  the  recipients  of  income,  constrained 
by  the  limitation  of  the  product  which  results  from  the  coercive 
association  of  labour,  cannot  give  to  their  subsistence  a  normal 
expansion,  and  yet  at  the  same  time  enjoy  a  considerable 
income  ;  hence  they  are  perpetually  struggling  between  two 
opposing  tendencies.  In  them,  as  in  Faust,  there  Hve  two  souls, 
each  hostile  to  the  other.  On  the  one  hand,  we  have  the 
material  and  prosaic  inclinations  leading  them  to  enlarge  their 
consumption  of  the  necessaries  of  life,  whilst,  on  the  other 
hand,  we  have  the  superior  inclinations  urging  them  to  enlarge 
their  more  refined  consumption.  In  such  conditions,  the 
struggle  between  subsistence  and  income  takes  the  form 
of  a  struggle  between  the  consumption  of  necessaries 
and  the  consumption  of  luxuries,  each  class  alternately 
gaining  or  losing  at  the  expense  of  the  other  in  an  unending 
conflict. 

In  the  case  of  mixed  income,  the  struggle  between  subsistence 
and  income  is  more  obvious  and  explicit. — ^In  fact,  in  this  form 


2 1 4  The  Economic  Synthesis 

of  income,  the  labourer,  who  receives  an  exiguous  undiffer- 
entiated income,  first  enlarges  it  artifically  at  the  cost  of 
subsistence,  and  then  endeavours  to  restore  the  level  of  sub- 
sistence at  the  cost  of  differentiated  income  ;  there  thus  arises 
a  primary  internal  conflict  between  subsistence  and  undiffer- 
entiated income,  and  a  subsequent  external  conflict  between 
subsistence  and  differentiated  income.  We  have  unmistakable 
examples  of  this  last  and  more  open  struggle  when  a  worker 
who  receives  a  wage  above  the  minimum  fights  for  a  further 
advance  of  pay,  or  when  (as  in  Tuscany  in  1902  and  1906) 
small  tenant  farmers  or  metayers  endeavour  to  secure  better 
terms  from  the  landowners,  or  independent  artisans  engaged 
in  home-work  for  a  capitalist  fight  for  better  terms  with  the 
capitalist.  In  all  these  cases  what  do  we  find,  substantially  ? 
— We  find  that  labourers  who  participate  in  income  are 
striving  to  increase  their  own  subsistence  at  the  expense  of  the 
owners  of  differentiated  income  ;  and  therefore  the  struggle 
between  them  and  their  masters  is  but  one  specific  form  of  the 
eternal  conflict  between  subsistence  and  income. 

But  in  the  case  of  differentiated  income  this  conflict  assumes 
a  yet  more  conspicuous  and  yet  more  plastic  form.  For  in  this 
form  of  income,  not  only  does  the  hmitation  in  the  quantity  of 
the  product  arising  from  the  coercion  to  the  association  of 
labour  invite  income  to  reduce  subsistence,  but  the  law  of  the 
persistence  of  income  demands  that  the  saving  of  the  worker 
shall  be  kept  below  the  value  of  access  to  the  land,  either  by 
means  of  a  direct  reduction  in  subsistence,  or  by  means  of  an 
elevation  in  the  value  of  access  to  the  land  which  indirectly 
depresses  subsistence. — Hence,  in  such  conditions,  subsistence, 
after  having  suffered  a  primary  reduction  through  the  coercion 
to  the  association  of  labour,  suffers  a  further  reduction  in  virtue 
of  the  law  of  the  persistence  of  income. — Against  this  twofold 
diminution,  subsistence  naturally  rebels,  endeavours  to  prevent 
such  diminution,  and  tries  further  to  effect  its  own  expansion 
to  the  detriment  of  income.  Thus  the  struggle  between  the 
two  fractions  of  the  product  finds  expression  for  the  first  time 
in  an  open  contest  between  the  two  classes  which  represent 
and  incarnate  these  respective  fractions. — ^This  is  the  struggle 
between  rich  and  poor  in  which  Aristotle  and  Polybius 
discovered    the    secret    of    history,    which    furrows    as    it 


The  Quantity  of  Income  215 

were  by  a  crimson-tinted   stream  the  predestined  course  of 
the  ages  : 

Toujours  barons  et  serfs,  fronts  casques  et  pieds  nus. 

Chasseurs  et  laboureurs  ont  echange  des  haines  ; 

Les  montagnes  toujours  ont  fait  la  guerre  aux  plaines. 

....  Pourtant,  j'en  conviens  sans  effort, 

Les  barons  ont  mal  fait,  les  montagnes  ont  tort.^ 

When  we  contemplate  this  tragic  contest,  which  continues 
without  pause  and  without  truce  throughout  recorded  history, 
we  are  inchned  to  think  with  Marcus  Aurelius  and  with 
Schopenhauer  that  history  is  nothing  more  than  the  everlasting 
repetition  of  the  same  passions  and  the  same  struggles,  and 
that  the  most  diverse  social  epochs  differ  from  one  another 
only  in  respect  of  the  names  of  the  personages  and  of  the 
staging  of  the  piece  ;  just  as  in  the  ancient  Italian  comedy, 
however  much  the  scene  and  the  subject  may  vary,  the  drama 
always  revolves  round  the  figures  of  the  dullard  Pantalone  and 
the  rogue  Tartaglia,  always  deals  with  the  cowardice  of 
Brighella  and  the  coquetry  of  Colombina.  Yet,  beneath 
the  fundamental  identity  of  the  struggle  between  subsist- 
ence and  income,  the  most  superficial  observer  can  dis- 
cover, in  successive  epochs,  the  most  significant  diver- 
gences. 

If,  however,  the  struggle  between  subsistence  and  income  is 
in  the  first  place  a  result  of  the  limitation  of  the  product,  it 
follows  that  it  should  gradually  become  less  intense  with  the 
evolution  of  income  to  forms  of  production  continually  less 
restrictive. — ^In  fact,  if  we  study  the  successive  forms  of 
differentiated  income,  we  find  that  the  struggle  between 
subsistence  and  income  displays  manifestations  less  and  less 
violent.  From  crucifixion,  which  was  a  perpetual  menace  to 
the  Roman  slave,  through  the  feudal  exactions  and  the  blows 
which  oppressed  the  medieval  serf,  to  the  fine  or  dismissal 
which  hang  over  the  head  of  the  modern  wage-earner,  the 
decline  is  undeniable  and  conspicuous. — ^In  correlation  with 
this  change,  we  find  also  that  the  reaction  of  subsistence 
against  income  becomes  less  violent.  From  the  slave-war,  fer- 
menting always  beneath  the  surface  in  secret  hatred,  breaking 

^  Victor  Hugo,  Les  Burgravea. 


2 1 6  The  Economic  Synthesis 

out  from  time  to  time  in  clamorous  sedition,^  next  in  the 
fierce  struggles  of  the  medieval  peasants,  carrying  on  their 
agitation  by  night  in  hidden  conventicles,  and  then  breaking 
out  in  cruel  jacqueries,  and  finally  in  the  labour  movement  of 
modern  times,  at  first  confused  and  anarchical,  but  at  length 
legal  and  disciplined,  we  have  a  regressive  series  in  respect  of 
violent  and  explosive  reactions,  and  a  continuous  progress 
towards  more  temperate  and  civilised  debate.  Moreover, 
whilst  the  ancient  methods  of  struggle  are  essentially  monopo- 
list and  restrictive,  and  increase  the  limitations  imposed  upon 
production  of  which  those  methods  are  themselves  the  out- 
come, the  modern  methods  are  technically  efficient  and  effect 
a  diminution  in  the  cost  or  an  increase  in  the  productivity  of 
human  labour. — ^Thus,  in  this  sphere  of  phenomena,  we  see 
once  more  revealing  itself  the  eternal  evolution  from  violence 
to  skill,  from  the  struggle  against  men  to  the  struggle  against 
nature  ;  or,  better  expressed,- the  struggle  among  men,  which 
in  former  days  was  a  hindrance  to  success  in  the  struggle  of 
men  against  nature,  now  passes  into  forms  which  make  the 
struggle  of  men  against  nature  continually  less  harsh  in 
character,  and  which  make  it  more  likely  to  triumph. 

On  the  other  hand,  precisely  because  the  struggle  between 
subsistence  and  income  is  a  corollary  of  the  limitation  of  the 
product,  that  struggle  necessarily  becomes  fiercer  during  the 
decHning  period  of  each  form  of  income,  wherein  the  restriction 
of  production  becomes  more  conspicuous.  This  happens  in 
the  cage  of  undifferentiated  income  when  the  sun  of  that 
form  of  income  is  setting,  and  when  undifferentiated  income 
has  largely  degenerated  into  differentiated  income  ;  thus  the 
struggles  between  the  richer  and  the  poorer  members  of  the 
primitive  community  or  of  the  medieval  guild  become  more 
tragical  during  the  dechning  phase  of  these  institutions,  just 
as  to-day  the  co-operatives  are  the  arena  of  fierce  conflict 
between  capitalist  members  and  labouring  members,  whenever 
their  affairs  are  going  badly  and  prove  less  lucrative  than 
before.  Still  more  plainly  manifest,  however,  are  these 
phenomena  in  the  case  of  differentiated  income  ;  for  here  the 
contests  between  slave-owners  and  slaves,  barons  and  serfs, 

*  Guiraud,  La  main  d'oRuvre  indtistrielle  dans  Vancienne  Grhce,  Paris,  1900, 
p.  119. 


The  Quantity  of  Income  2 1 7 

capitalists  and  wage -earners,  always  become  more  intense 
during  periods  of  decline  and  of  industrial  stagnation.  ^  Thus 
arises  a  repercussion.  In  fact,  the  reduction  of  subsistence 
induces,  as  we  know,  an  increasing  interference  on  the  part  of 
the  workers  with  the  productive  process,  whence  results  a 
slackening  of  this  latter  and  a  diminution  of  the  product ; 
that  is  to  say,  the  very  conditions  that  result  from  the  falling- 
off  in  the  product  co-operate  to  effect  a  further  decline. 

If  J  now,  we  ask  ourselves  what  is  the  concrete  result  of  the 
conflict  between  subsistence  and  income,  at  what  point,  as  the 
outcome  of  this  struggle,  subsistence  is  established,  we  must 
answer  that,  in  the  last  resort,  the  arbiter  in  the  contest  is 
income,  and  that  subsistence  becomes  established  at  that  point 
which  gives  the  maximum  permanent  income.  This  may  or 
may  not,  according  to  circumstances,  coincide  with  the 
maximum  immediate  income.  In  the  case  of  undifferentiated 
income,  stable  by  nature  and  comparatively  immune  from 
threatening  dangers,  the  maximum  permanent  income 
coincides  with  the  maximum  immediate  income.  In  the 
case  of  differentiated  income,  on  the  other  hand,  matters  are 
different ;  for  if  that  level  of  subsistence  which  furnishes 
the  maximum  immediate  differentiated  income  enables  the 
labourer  to  effect  savings  which  exceed  the  value  of  access  to 
the  land,  differentiated  income  is  condemned  to  death  without 
possibihty  of  reprieve  ;  to  avoid  this  it  is  necessary  that  sub- 
sistence should  be  reduced  to  a  lower  figure,  and  this  cor- 

1  Thus  the  uprising  of  the  Piedmontese  serfs  (the  ttichini,  from  tucc-un — 
"  all  one  ")  in  the  years  1382-4,  and  the  peasant  revolt  which  occurred 
contemporaneously  in  England,  not  to  mention  the  rising  of  the  va-nu-pieds 
in  Normandy,  or  that  of  the  croquants  of  Guyenne  in  the  seventeenth  century, 
are  nothing  more  than  reactions  against  the  baronial  exactions  when  these 
become  excessive  as  income  declines  (Rogers,  History  of  Agriculture,  Vol.  I, 
pp.  82,  et  seq.  ;  Walker- Page,  loc.  cit.).  Similarly  in  Russia  to-day  labour- 
struggles  and  mutual  dissatisfaction  between  entrepreneurs  and  workers 
regularly  ensue  during  the  decline  that  follows  a  period  of  industrial  expan- 
sion {Russian  National  Economy,  Nov.  and  Dec,  1904,  p.  26).  In  the  United 
States,  again,  the  commercial  crisis  of  the  year  1903  renders  worse  the  rela- 
tionships between  employees  and  employers,  and  the  latter  take  advantage 
of  the  weakness  of  the  trade  unions  which  results  from  the  crisis  to  withdraw 
from  their  undertaking  not  to  employ  non-union  men  ;  thus  between  the 
end  of  1903  and  May,  1905,  1500  firms  of  employers  once  more  open  their 
doors  to  non-unionists  (Lescure,  loc  cit.,  p.  373).  It  may  be  generally  noted 
that  recourse  to  arbitration  is  more  likely  during^fperiods  of  prosperity,  for 
the  employers  are  then  more  inclined  to  propose  arbitration,  and  the  workers 
have  less  reason  to  regard  arbitration  as  a  ruse  to  depress  wages  (Pigou, 
Principles  and  Methods  of  Industrial  Peace,  London,  1905,  p.  15). 


2 1 8  The  Economic  Synthesis 

relatively  reduces  income  below  the  maximum  figure.  The 
measure  to  which  subsistence  wiU  be  reduced  will  be  precisely 
that  which  yields  the  maximum  permanent  income. 

If  we  suppose,  for  the  sake  of  simphcity,  that  the  maximum 
permanent  income  coincides  with  the  maximum  immediate 
income,  the  quantity  of  product  assigned  to  the  labourer  is 
that  which  gives  the  maximum  income.  Hence,  whatever  be 
the  initial  figure  of  subsistence,  if  the  increase  in  subsistence, 
by  increasing  the  number  of  workers  permanently  employed, 
or  by  stimulating  the  efficiency  of  labour,  increases  income, 
the  figure  of  subsistence  will  rise  ;  and  this  increase  in  sub- 
sistence will  proceed  until  the  point  is  attained  at  which 
income  reaches  its  maximum.  It  may  happen  that  the  maxi- 
mum income  is  obtained  by  an  increase  in  subsistence  more 
than  proportional  to  the  increase  in  the  productivity  of 
labour,  and  therefore  more  than  proportional  to  the  absolute 
increase  in  income  which  results  from  the  increase  in  sub- 
sistence ;  and  in  such  a  case  subsistence  will  effectively  rise 
in  a  measure  more  than  proportional  to  the  increase  in  the 
productivity  of  labour  and  of  income.  But  it  is  necessary  to 
point  out  that  in  such  a  case  (leaving  technical  capital  out  of 
consideration,  or  supposing  technical  capital  to  increase  pro- 
portionately with  subsistence)  the  increase  of  subsistence  gives 
rise  to  a  diminution  in  the  rate  of  income,  and  therefore  cannot 
take  place  if  that  rate  is  to  remain  constant. — Finally  (if  the 
supply  of  labour  is  limited),  it  may  happen  that  the  maximum 
income  is  obtained  by  the  addition  of  a  part  of  income  to  the 
subsistence  of  the  worker,  or  by  the  creation  of  mixed  income. 
Now  in  this  case  the  quantity  of  product  assigned  to  the 
worker  is  that  which  yields,  not  the  maximum  total  income, 
but  the  maximum  differentiated  income  ;  for  the  owner  of 
differentiated  income  is  the  arbiter  in  the  distribution  of  the 
product,  and  determines  this  with  an  eye  to  his  own  advantage. 
Hence,  when  the  quota  of  the  labourer  does  not  contain  any 
part  of  income,  it  estabHshes  itself  at  that  figure  which  gives 
the  maximum  income,  and  the  income  in  these  conditions  is 
necessarily  differentiated  ;  when  the  quota  of  the  labourer 
contains  a  share  of  income,  subsistence  is  established  at  that 
figure  which  gives  the  maximum  differentiated  income  ;  that 
is  to  say,  in  every  case,  the  struggle  between  subsistence  and 


The  Quantity  of  Income  219 

income  results  in  the  quota  of  the  labourer  being  fixed  at  that 
point  at  which  will  be  furnished  the  maximum  differentiated 
income.  ^ 

Now,  an  increase  in  the  quantity  of  product  assigned  to  the 
labourer  (that  is  to  say,  an  increase  in  wages),  will  be  more 
L'kely  to  lead  to  an  increase  in  the  differentiated  income,  and 
therefore  will  be  more  Hkely  to  occur,  in  proportion  as  the 
productivity  of  associated  labour  is  greater — ^for  the  greater 
then  will  be  the  increase  in  the  product  which  results  from  an 
increase  in  the  number  of  the  associated  labourers  and  in  the 
individual  output — and  thence  from  the  increase  of  subsistence, 
which  gives  rise  to  the  twofold  increase  just  explained.  Hence, 
the  more  the  productivity  of  labour  increases,  the  more  probable 
is  it  that  subsistence  will  rise,  or  that  eventually  to  subsistence 
will  be  superadded  a  share  of  income.  And  since  the  successive 
phases  of  income  endow  associated  labour  with  an  ever- 
increasing  productivity,  the  quantity  of  subsistence  should, 
in  the  successive  phases  of  income,  progressively  increase. — 
But  the  increase  in  subsistence  is  less  sensible  in  those  forms 
of  differentiated  income,  or  in  those  declining  phases  of  every 
form  of  differentiated  income,  in  which  the  persistence  of 
income  itself  depends  upon  a  reduction  in  the  remuneration  of 
the  labourer  ;  on  the  other  hand,  the  increase  in  subsistence 
is  more  conspicuous  and  more  decisive  in  those  forms  of  income, 
and  in  those  ascendent  phases  of  income,  in  which  the  per- 
sistence of  differentiated  income  depends  upon  an  increase  in 
the  value  of  access  to  the  land. — Even  if  it  be  true  that  this 
latter  process  has  itself  also  an  indirect  influence  towards  the 
diminution  of  subsistence,  it  is  none  the  less  true  that  in  the 
former  case  subsistence  remains  inferior  to  the  constant  value, 
whatever  that  may  be,  of  access  to  the  land,  whereas  in  the 
latter  case  subsistence  has  to  remain  inferior  to  an  increasing 
value  of  that  access — so  that,  in  the  latter  case,  subsistence 
itself  should  attain  a  higher  level. 

This  is  why  it  is  that  in  the  passage  of  differentiated  income 
from  the  phase  of  the  systematic  wage-system  to  that  of 
the  automatic  wage-system,  there  occurs  a  primary  notable 

^  This  conclusion  is  in  no  way  modified  by  the  fact  that  the  rate  of  wages 
is  sometimes  estabHshed  by  arbitration,  for  substantially  this  means  no  more 
than  an  amiable  and  pacific  determination  of  that  rate  of  wages  which  the 
conditions  of  the  economic  system  in  any  case  render  necessary-. 


220  The  Economic  Synthesis 

elevation  in  the  figure  of  subsistence  ;  and  with  the  further 
progress  of  the  automatic  wage-system,  there  occurs  a  further 
advance  in  subsistence,  until  the  latter  at  length  annexes  a 
certain  share  of  income.  This  exercises  a  considerable  influence 
in  changing  the  law  of  numerical  distribution  of  those  workers 
who  receive  diminishing  wages.  In  fact,  it  is  logical  to  suppose 
that,  at  the  outset  of  the  change,  the  more  favoured  workers, 
those  enjoying  an  absolute  monopoly  which  permits  them  to 
attain  the  maximum  wage,  are  in  minimal  number,  whilst  the 
number  is  gradually  increasing  of  those  who  find  themselves 
in  less  advantageous  conditions,  and  who  therefore  can  be 
paid  at  a  progressively  lower  rate.  In  other  words,  at  the 
outset,  the  distribution  of  the  workers  who  receive  diminishing 
wages  may  be  represented  by  a  pyramid.  But  if  now  the  wages 
of  the  lower-paid  workers  increase,  a  part  of  those  who  ha\e 
hitherto  been  lowest  in  the  scale  rise  to  higher  levels.  There 
occurs,  therefore,  a  diminution  in  the  number  of  those  at  the 
bottom  of  the  scale  and  an  increase  in  the  number  of  those  just 
above  this  ;  and  it  may  happen  that  this  movement  will 
continue  until  the  number  of  those  at  the  bottom  of  the  scale 
becomes  less  than  that  of  those  just  above  them.  At  this 
point  the  distribution  of  the  workers  in  accordance  with 
the  rate  of  wages  is  no  longer  to  be  represented  by  a  pyramid 
but  by  a  parabola.    Thus,  if  at  the  outset 

10  workers  had  a  wage  of  100  francs 
20         ,,  „  ,,  80      ,, 

30         „  „  „  60       „ 

40  „  „  „  40       „ 

60  „  „  „  30       „ 

and  if  now  in  the  case  of  forty  workers  of  the  lowest  class  and 
of  twenty  of  the  lowest  but  one  the  wages  rise  to  60  francs, 
we  see  that 

10  workers  have  a  wage  of  100  francs 

20  ,,  ,,  ,,  80         ,, 

90  „  „  „  60 

20  „  „  „  40 

10  „  „  „  30        „ 

so  that  the  distribution  according  to  wages  no  longer  has  the 
form  of  a  pyramid  but  that  of  a  parabola. 


The  Qtiantity  of  Iiicorne  22 1 

Thia  is  precisely  the  curve  in  accordance  with  which  the 
wage-earners  are  distributed  at  the  present  day  in  the  most 
advanced  nations. — ^In  the  youngest  of  these  countries,  as  in  the 
United  States,  this  curve  is  unsymmetrical  and  incomplete. 
But  in  older  countries  the  parabola  of  the  wage-earners  takes  a 
much  more  distinct  form. 

From  this  remarkable  form  which  in  our  own  times  is 
presented  by  the  distribution  of  wages,  certain  statisticians 
have  hastened  to  draw  the  most  optimistic  and  most  roseate 
conclusions. — ^If,  indeed,  they  tell  us,  the  workers  receiving 
maximal  and  minimal  wages  are  few,  the  number  of  the 
workers  endowed  with  quahties  conspicuously  superior  or 
inferior  to  the  average  is  also  in  Hke  measure  small  ;  and  if  the 
number  of  workers  receiving  wages  gradually  falling  away 
from  the  maximum,  or  rising  above  the  minimum,  and  thus 
approaching  the  mean,  is  an  increasing  one,  there  is  also  an 
increase  in  the  number  of  workers  whose  capabilities  fall  below 
the  maximum  or  rise  above  the  minimum  to  approach  the 
average.  The  curve  of  wages  therefore  presents  a  perfect 
homology  with  respect  to  the  curve  representing  the  capa- 
bihties  of  the  workers,  and  this  shows  that  the  figure  represent- 
ing wages  is  perfectly  adequate  to  the  capabiHties  or  to  the 
productive  capacity  of  the  labourer.  ^ 

To  show  the  futility  of  these  conclusions,  it  suffices  to  refer 
to  the  fact  recently  observed  that  the  curve  of  wages  diverges 
normally  and  constantly  from  the  binomial  curve  representing 
the  capabilities  of  the  labourers,  and  that  this  divergence  is 
especially  marked,  it  may  be  in  the  case  of  the  lowest  wages, 
which  are  more  numerous  and  present  a  lower  level  than  that 
which  should  correspond  to  the  curve  of  the  capabilities,  it 
may  be  in  the  case  of  the  highest  wages  which  are  received  by 
a  smaller  number  of  workers  than  should  be  the  case  in  con- 
formity with  the  binomial  curve.*    It  must  further  be  added 

1  Benini,  Principii  di  demografia,  Florence,  1901,  pp.  104-5. 

2  Henry,  La  meaure  des  capaciUs  intellectuelles  et  energ^tiques,  Paris,  1906, 
pp.  5\,\et  seq.  Moore  {The  Efficiency  Theory  of  Wages,  "  Economic  Journal," 
1905,  pp.  571,  et  seq.  ;  and  The  Differential  Law  of  Wages,  "  Journal  of 
Statistical  Society,"  1907,  pp.  638,  et  seq.)  endeavours  to  prove  that  individual 
wages  are  distributed  according  to  a  composite  curve  corresponding  to  the 
twofold  series  of  the  capacities  and  the  strategic  power  of  the  labourers ; 
this  last,  he  considers,  somewhat  crudely,  to  be  susceptible  of  two  gradations 
only,  acoording  as  labour  is  skilled  or  unskilled.    But  according  to  Moore's 


222  The  Economic  Synthesis 

that  the  distribution  of  wages  in  a  curve  is  a  phenomenon 
pecuHar  to  the  automatic  wage-system,  for,  as  long  as  the 
systematic  wage-system  lasts,  the  distribution  of  wages  is 
pyramidal ;  it  therefore  remains  true  in  any  case  that  over  a  long 
period  the  distribution  of  wages  takes  a  course  altogether 
different  from  that  of  the  capabiHties  of  the  labourers.  In  fact, 
then,  the  distribution  of  wages  in  the  form  of  a  parabola  which 
is  characteristic  of  the  automatic  wage-system  presents  itself 
as  the  natural  derivative  of  the  general  rise  in  wages,  and  more 
particularly  of  the  lowest  wages,  and  can  therefore  be  per- 
fectly well  explained  without  supposing  the  existence  of  any 
mysterious  correlation  between  the  level  of  wages  and  that  of 
the  capacity  of  the  labourer. — ^What  occurs  is  that  the  partial 
rise  of  the  lower  wage-earners  into  liigher  grades,  resulting 
from  the  rise  in  their  wages,  diminishes  the  ratio  between  the 
number  of  those  in  the  lower  and  the  number  of  those  in  the 
higher  classes,  and  thus  gradually  removes  material  from  the 
base  of  the  pyramid  of  wages  until  this  pjrramid  is  transformed 
into  a  parabola.    That  is  all. 

Such  is  the  law  which  regulates  the  quantity  of  subsistences, 
which  quantity,  as  long  as  it  remains  at  a  level  inferior  to  that 
of  the  product  of  isolated  labour,  is  a  factor  determining  the 
figure  of  income. — ^It  must  be  understood  that  this  law  does 
not  apply  only  to  the  subsistence  of  productive  labour,  but 
also  to  that  of  unproductive  labour  which  receives  sub- 
sistence in  advance,  for  example,  to  that  which  is  re- 
quired to  effect  the  coercion  to  the  association  of  labour 
and  the  persistence  of  differentiated  income.  It  must  be 
understood,  also,  that  the  law  of  subsistence  can  be 
modified  by  the  action  of  the  State,  when  this  establishes 
a  minimum  wage,  or  diminishes  or  increases  the  taxes  upon 
wages,  etc.  etc. 

IV.  The.  Quantity  of  Saving. — Saving  and  Population. 

As  long  as  saving  is  assumed  to  be  constant,  the  elements 
hitherto  analysed  alone  suffice  to  determine  the  quantity  of 
income,  which  (if,  for  the  sake  of  brevity,  we  leave  out  of 

own  calculations,  the  real  curve  of  wages  diverges  also  from  this  com- 
posite curve  in  the  sense  of  a  greater  insufficiency  and  a  greater  frequency  of 
low  wages,  and  a  lesser  frequency  of  high  wages. 


The  Qnmitiiy  of  Income  223 

consideration  that  part  of  the  net  product  which  is  trans- 
formed into  non-periodic  accruements)  is  equal  to  the  excess 
of  the  product  of  associated  labour  over  the  technical  capital 
consumed  plus  the  excess  of  the  product  of  isolated  labour  o\er 
subsistence  ;  or,  to  put  the  matter  more  concisely,  it  is  equal 
to  the  excess  of  the  total  product  over  the  consumption 
of  technical  capital  and  subsistences.  In  normal  economic 
conditions,  however,  saving  is  not  constant,  but  progressively 
increases. — Now,  given  progressive  saving,  the  excess  thus 
determined  is  no  longer  wholly  income,  since  a  part  of  it  under- 
goes conversion  into  technical  capital  and  subsistence,  pro- 
ductive or  unproductive.  Hence,  to  determine  the  quantity 
of  income  it  is  necessary  to  subtract  from  the  total  pro- 
duct that  part  also  of  the  product  which  is  productively 
and  unproductively  saved.  Now,  leaving  out  of  account 
for  the  sake  of  brevity  unproductive  accumulation,  often 
irregular,  and  in  any  case  self -destructive  and  ephemeral, 
upon  what  depends  the  quantity  of  product  which  comes  to 
be  saved  ? 

Let  us  suppose  first  of  all  the  extreme  case  in  which 
the  whole  quantity  of  product  is  saved,  over  and  above 
what  is  required  for  subsistences  and  for  the  redintegra- 
tion of  technical  capital.  In  these  conditions,  in  which 
income  is  actually  annulled,  the  quantity  of  wealth  saved 
i8  the  quantity  of  wealth  produced — ^less  the  redintegra- 
tion of  the  productive  elements,  a  constant  and  primary 
datum  ;  hence,  in  proportion  as  the  wealth  produced  in- 
creases or  diminishes,  so  also  increases  or  diminishes  the 
wealth  saved. 

In  actual  fact,  however,  not  aU  the  excess  of  the  product 
over  the  redintegration  of  the  productive  elements  is  devoted 
to  saving  ;  for  a  part  of  this  excess  is  employed  to  maintain 
unproductive  labourers,  or  is  distributed  gratuitously  among 
a  part  of  the  population,  or  is  directly  consumed  by  the 
recipients  of  income,  whose  income  in  the  strict  sense  of  the 
term  it  thus  constitutes.^ — ^In  such  conditions,  the  quantity  of 

1  Hence  the  calculations  made  by  Price,  Cayley,  and  others,  who  have 
endeavoured  to  ascertain  to  how  many  thousand  millions  of  francs  would  now 
amount  the  sum  produced  by  one  franc  accumulated  at  compound  interest 
since  the  beginning  of  the  Christian  era,  are  essentially  vitiated  by  the  fact 
that  they  involve  the  fallacious  supposition  that  all  the  income  is  saved. 


224  The  Econo^nic  Synthesis 

saving  is  determined,  not  only  by  the  quantity  of  the  product, 
but  in  addition  by  the  proportion  of  this  which  is  saved  ;  and 
therefore  saving  may  vary,  while  the  product  remains  constant, 
in  accordance  with  variations  in  the  extent  of  saving  or  in  the 
elements  which  prescribe  its  amount. — But  according  to  what 
rule  is  the  measure  of  saving  estabhshed  ?  At  what  limit  does 
it  tend  to  become  fixed  ? — ^The  reply  does  not  differ  from  that 
which  we  have  given  as  regards  the  factors  previously  con- 
sidered ;  the  normal  quantity  of  saving,  or  the  proportion  of 
income  periodically  saved,  is  that  which — ^the  other  elements 
remaining  constant — secures  the  maximum  income,  not 
immediately  (for  the  maximum  immediate  income  excludes 
'per  se  that  any  part  of  it  shall  be  saved),  but  during  a  period 
embracing  the  normal  or  probable  life  of  the  recipient  of 
income — or,  in  a  word,  which  secures  the  maximum  totaHsed 
income  during  life. 

-If,  indeed,  during  the  n  years  which  remain  to  him,  the  re- 
cipient of  income  consume  all  his  income,  he  will  have  received, 
at  the  end  of  the  n  years,  his  annual  income  multiplied  by  n. 
If,  during  the  n  years,  the  recipient  of  income  save  the  whole 
of  his  income,  he  will  have  received,  at  the  end  of  the  n  years, 
an  income  of  zero.  But  if,  during  the  period  in  question,  he 
save  a  part  only  of  his  income,  it  may  happen  that,  at  the  end 
of  the  n  years,  the  parts  of  the  original  income  gradually  con- 
sumed plus  the  incomes  derived  from  the  parts  gradually 
saved,  will  exceed  the  initial  income  multiplied  by  n.  And 
there  will  be  a  given  fraction  of  income  the  saving  of  which 
will  yield,  at  the  end  of  the  n  years,  a  sum  total  of  income 
which  exceeds  to  the  maximum  degree  the  initial  income 
multiplied  by  n.  Now  it  is  at  this  level  that  saving  will  be 
established,  for  it  is  this  alone  which  corresponds  to  the  ulti- 
mate advantage  of  the  recipient  of  income. 

Thus,  for  example,  let  us  suppose  that  the  annual  income 
is  100,  and  that  every  fraction  of  income  accumulated  obtains 
interest  at  the  rate  of  100  %  ;  and  let  us  further  suppose  that 
the  expectation  of  life  of  the  recipient  of  income  is  five  years. 
If  the  recipient  of  income  consume  the  whole  of  his  income,  he 
receives  a  totalised  income  during  hfe  of  500.  If,  on  the  other 
hand,  the  annual  saving  be  50,  during  the  first  year  he  consumes 
50  and  saves  50  ;  during  the  second  year  he  consumes  50,  plus 


The  Quantity  of  htcoine 


225 


50,  the  income  furnished  by  the  saving  of  the  first  year,  in  all 
100,  and  he  saves  50 — and  so  on  ;  so  that  we  have 


Year. 

Income  consumed. 

Saving 

1 

50 

50 

2 

100 

50 

3 

160 

50 

4 

200 

60 

5 

250 

60 

Total     750 

250 

Hence  the  recipient  of  income,  saving  50  every  year,  ends  by 
consuming  during  the  five  years  of  his  Ufe  a  larger  quantity  of 
income  than  he  would  have  consumed,  had  he  consumed  year 
by  year  the  whole  of  his  income  of  100.  Therefore  the  saving 
within  the  limits  here  defined  is  advantageous  to  the  recipient 
of  income.  Let  us  now  suppose  that  he  goes  further  than  this 
and  saves  half  of  his  income  every  year.  In  such  conditions 
we  have 


Year. 

Income  consumed. 

Saying. 

1 

50 

50 

2 

75 

75 

3 

112-5 

112-5 

4 

168-75 

168-75 

5 

Total 

25310 

253-10 

659-35 

659-35 

It  follows  from  this  that,  when  he  saves  every  year  half  of  his 
income,  the  recipient  of  income  ends  by  having  obtained,  at 
the  close  of  his  life,  a  total  income  less  than  that  which  he 
would  have  received  by  saving  annually  only  50.  Therefore 
the  annual  saving  of  50  yields  to  our  recipient  of  income  the 
maximum  totahsed  income  during  life,  and  will  therefore  be 
actually  practised  by  him  in  conformity  with  his  own  interest. 
The  quantity  of  saving  thus  determined  varies  according  to 
variations  in  the  rate  of  interest  ^  and  in  the  expectation  of  life 
of  the  recipient  of  income.    The  higher  the  rate  of  interest, 

1  As  regards  the  measure  of  the  rate  of  interest,  consult  the  author's 
Analisif  I,  pp.  417,  et  aeq. 

Q 


226 


The  Economic  Synthesis 


the  more  probable  is  it  that  the  maximum  totalised  income 
during  life  which  can  be  obtained  by  saving  a  certain  portion 
of  the  income  will  exceed  that  which  can  be  obtained  by 
consuming  the  whole  of  the  income,  and  the  more  probable  is 
it  therefore  that  saving  will  be  advantageous.  Thus,  if  the 
rate  of  interest  be  120  %,  and  there  be  saved  annually  50, 
we  have 


'ear. 

Income  consumed. 

Saving. 

1 

50 

60 

2 

110 

50 

3 

170 

50 

4 

230 

50 

5 

290 

50 

Total 

850 

250 

That  is  to  say,  the  maximum  totalised  income  during  life 
exceeds  by  a  greater  amount  that  which  would  be  obtained  by 
consuming  the  entire  income,  than  the  excess  exhibited  when 
the  rate  of  interest  was  100  %,  so  that  there  is  a  greater 
stimulus  to  saving.  Conversely,  a  decline  in  the  rate  of  interest 
diminishes  the  stimulus  to  saving,  and  such  decline  may  at 
length  diminish  the  maximum  totahsed  income  during  life, 
obtained  by  saving,  below  that  which  would  be  obtained  by 
consuming  the  income,  thus  rendering  saving  irrational.  If, 
for  example,  the  rate  of  interest  be  20  %,  and  every  year  the 
saving  be  50,  we  have 


Year. 

Income. 

Income  consumed. 

Saving. 

1 

100 

50 

60 

2 

no 

60 

50 

3 

120 

70 

60 

4 

130 

80 

50 

5 

140 

90 

50 

Total    350 

Thus,  whereas  by  consuming  the  whole  of  the  income  there  is 
obtained  a  maximum  totahsed  income  during  life  of  500,  by 
saving  annually  50,  there  is  obtained  only  a  maximum  totahsed 
income  during  Hfe  of  350  ;  that  is  to  say,  the  diminution  in  the 


The  Quantity  of  Income  t.t.'^ 

rate  of  interest  has  rendered  saving  irrational.  ^ — But  this  does 
not  suffice,  for,  the  higher  the  rate  of  interest,  the  greater  is 
likely  to  be  the  portion  of  income  whose  saving  will  furnish 
the  maximum  totahsed  income  during  life.  Thus,  to  continue 
the  preceding  example,  whereas,  when  the  rate  of  interest 
is  100  %,  the  annual  saving  of  50  for  five  years  yields  a  totalised 
income  during  Hfe  greater  than  is  yielded  by  the  saving  of  half 
the  income — ^an  analogous  calculation  shows  that  if  the  rate 
of  interest  rises  to  200  %,  the  annual  saving  of  50  for  five  years 
gives  a  totalised  income  during  life  of  1250,  whereas  the  saving  of 
half  the  income  gives  a  totalised  income  during  fife  of  1550, 
that  is  to  say  the  latter  yields  a  larger  total.  Thus  the  rise  in 
the  rate  of  interest  renders  it  advantageous  to  save  as  much  as 
half  the  income,  whereas  at  the  lower  rate  of  interest  it  is 
more  profitable  to  save  a  lesser  quantity. 

*  Clark  {Essentials,  pp.  339,  et  seq.)  arrives  at  opposite  conclusions.  He 
affirms  that  the  recipient  of  income,  when  he  saves,  aims  to  secure  for  himself 
in  later  years,  and  subsequently  for  his  children,  a  determinate  economic 
condition,  that  is  to  say,  a  given  income.  Now,  the  lower  the  rate  of  interest, 
the  greater  is  the  capital  requisite  to  produce  a  given  income  ;  hence  a  fall  in 
the  rate  of  interest  stimulates  saving  (a  thesis  put  forward  by  Marshall,  but 
only  by  way  of  exception,  in  his  Principles,  5th  edition,  p.  235  ;  firmly 
sustained  by  Webb  ;  and  in  earlier  days  maintained  by  Child,  New  Dis- 
courses of  Trade,  1690,  pp.  40,  42).  Pushing  this  argument  to  an  extreme 
Gonner  arrives  at  the  conclusion  that  to  annul  interest  altogether  might  lead 
to  an  increase  in  saving  {Interest  and  Saving,  London,  1906,  pp.  24,  et  seq., 
also  Edgeworth,  Mathematic  Psychics,  p.  270,  Carver,  and  others),  whereas 
it  seems  to  me  that  if  interest  were  unattainable,  if,  that  is  to  say,  no  income 
of  any  kind  could  be  derived  from  saving,  wealth  might  indeed  be  hoarded, 
or  its  consumption  might  be  deferred,  but  there  would  be  no  reason  what- 
ever to  devote  wealth  to  productive  uses  ;  and  if  the  owner  were  to  deposit 
his  wealth  in  a  bank,  the  bank  would  be  forbidden  to  make  use  of  it,  as  happened 
in  the  Middle  Ages.  Saving,  properly  so  called,  would  therefore  come  to  an 
end.  Apart  from  this  consideration,  Clark's  conclusion  would  be  admissible 
if  those  who  saved  did  so  with  the  aim  of  obtaining  at  some  future  time  an 
income  fixed  and  for  ever  invariable.  Conversely,  the  sum  of  income  which, 
by  hypothesis,  they  aim  at  obtaining  in  the  future  bears  always  a  certain 
ratio  to  that  which  they  obtain  now.  Now  the  fall  in  the  rate  of  interest 
diminishes  the  immediate  income,  at  any  rate  the  immediate  income  of  a 
notable  proportion  of  those  who  save,  that  is,  of  the  capitalists  ;  and  therefore 
effects  a  corresponding  diminution  in  the  income  which  they  hope  to  obtain  in 
the  future.  Hence,  since  the  quantity  of  the  future  income  which  they  hope  to 
obtain  diminishes  proportionally  with  the  fall  in  the  rate  of  interest,  the  total 
quantity  of  capital  which  they  must  save  in  order  to  obtain  the  income  that 
is  desired  in  the  future  remains  imchanged  although  the  rate  of  interest  falls. 

In  reality,  the  recipients  of  income  who  are  guided  by  the  criterion  of 
economic  interest  do  not  aim  at  obtaining  a  determinate  future  income,  or  an 
income  proportional  to  their  present  income,  but  at  obtaining  the  maximum 
totalised  income  during  life,  and  eventually  during  the  lives  of  their  children  ; 
and  since  this  is  the  cs^e,  a  fall  in  the  rate  of  interest  may  slacken  or  suppress 
saving,  as  shown  in  the  text. 


228 


The  Economic  Synthesis 


Analogous  reasoning  shows  that  an  increase  in  the  expecta- 
tion of  life  of  the  recipient  of  income,  the  other  conditions 
remaining  unchanged,  increases  the  gain  resulting  from 
saving.  In  fact,  the  excess  of  the  totaHsed  income  during  life, 
which  is  obtained  by  saving  a  certain  proportion  of  the  income, 
over  that  which  is  obtained  by  consuming  the  whole  of  the 
income,  is  negative  during  the  earlier  years,  and  does  not 
become  positive  until  after  the  lapse  of  a  certain  time,  after 
which  the  positive  excess  increases  year  by  year,  as  is  evident 
when  we  refer  back  to  the  figures  given  on  page  225.  These,  in 
fact,  show  that  the  total  quantity  of  income  received  at  the  end 


Of 

If  the  saving 
be  zero,  is 

If  the  annual 
saving  be  50,  is 

Difference 
+  or- 

lyear 

2  years 

3  ., 

100 
200 
300 

50 
150 
300          .. 

-50 

-50 

0 

4  „ 

5  „ 

400 
500 

500 
750 

+  100 
+250 

and  it  follows  from  this  that  if  the  average  life  of  the  recipient 
of  income  be  one  or  two  years,  the  annual  saving  of  50  will  yield 
a  totalised  income  less  than  that  obtained  by  the  consumption  of 
the  whole  income ;  if  the  average  hfe  be  three  years,  the  totalised 
income  will  be  the  same  in  both  cases  ;  if  the  average  life  be 
more  than  three  years,  saving  wiU  yield  a  greater  totahsed 
income  than  consumption,  the  excess  furnished  by  saving 
being  greater  in  proportion  as  the  average  duration  of  life 
increases.  It  foUows  that  the  greater  this  average  duration, 
the  greater  the  stimulus  to  saving.  Nor  is  this  all,  for  the 
longer  the  average  life  of  the  recipient  of  income,  the  greater 
is  the  quantity  of  income  whose  saving  wiU  yield  the  maximum 
totalised  income  during  life.  Calculation  shows  that  if  the  rate 
of  interest  be  200  %  and  the  average  life  three  years,  the  annual 
saving  of  50  gives  a  totalised  income  of  450,  and  the  saving  of 
half  the  income  gives  a  totalised  income  of  350,  that  is  to  say 
it  gives  less  ;  whereas  if  the  average  life  be  five  years,  we  have 
seen  that  the  saving  of  haK  the  income  gives  a  totalised  income 
superior  to  that  given  by  the  annual  saving  of  50.  From  this 
it  foUows  that  when  the  average  life  is  short,  the  saving  of  a 
part,  and  of  a  relatively  conspicuous  part,  of  the  income 


The  Quantity  of  Income  229 

increases  the  totalised  income  only  on  condition  that  the  rate 
of  interest  be  high.  This  is  one  of  the  reasons  why,  during  the 
Middle  Ages,  and  generally  during  periods  of  war  or  revolu- 
tion, in  which  the  mean  duration  of  life  is  comparatively  low, 
the  rate  of  interest  is  high.  Conversely,  in  conditions  in  which 
the  mean  duration  of  life  is  high,  the  partial  saving  of  income 
increases  the  totalised  income  even  if  the  rate  of  interest  be 
low. — ^If,  now,  the  recipient  of  income  wishes  to  obtain  the 
maximum  income,  not  only  during  his  own  life,  but  also 
during  that  of  his  children,  this  amounts  to  saying  that  the 
average  life  which  has  to  be  taken  into  consideration  is  equal 
to  that  of  the  recipient  of  income  plus  the  number  of  years  by 
which  his  children  may  be  expected  to  survive  him  ;  that  is  to 
say,  it  is  in  effect  as  if  we  had  to  do  with  a  recipient  of  income 
whose  mean  duration  of  life  were  greatly  superior  to  that  of  the 
normal  man.  Therefore  in  such  cases  the  saving  of  a  part,  and 
a  conspicuous  part,  of  the  income  increases  the  totalised 
income,  so  that  there  is  a  motive  for  such  saving  even  if  the 
rate  of  interest  be  low.  ^ 

Thus  it  is  to  the  interest  of  the  recipient  of  income  to  limit 
saving  to  a  more  or  less  circumscribed  fraction  of  the  income. 
But  saving  does  not,  as  a  rule,  attain  even  to  this  circumscribed 
level,  because  of  the  operation  of  various  influences  intimately 
connected  with  the  organic  structure  of  the  concrete  forms 
of  income,  for  these  influences  either  render  it  impossible 
for  savings  exceeding  a  certain  limit  to  produce  any  increase 
of  income,  so  that  saving  is  for  this  reason  suppressed,  or  else 
these  influences  limit  the  total  number  of  the  recipients  of 
income,  and  therewith  limit  the  total  saving. 

Considering  first  of  all  undifferentiated  income,  we  find,  for 
the  reasons  previously  given,  that  in  this  form  of  income  the 

*  In  this  connexion  Cassel  makes  some  acute  observations  {The  Nature  and 
Necessity  of  Interestyhondon,  1903,  pp.  I45,e/s^^.,pp.  152, etseq.).  But  the  author 
complicates  and  vitiates  his  demonstration  by  supposing  that  the  wealth  which 
is  not  saved  is  devoted  to  the  purchase  of  a  hfe  annuity.  Now  in  such  a  case 
this  wealth,  if  it  be  not  saved  by  the  one  who  buys  the  annuity,  is  saved,  at 
least  in  part,  by  the  one  who  pays  it.  If  I  give  100,000  francs  to  John  Smith 
in  order  to  obtain  from  him  a  life  annuity  of  6,000  francs,  John  Smith  saves 
the  100,000  francs,  and  tliis  sum  is  consiuned  only  to  the  extent  of  the  differ- 
ence between  the  6,000  francs  and  the  normal  interest  upon  100,000  francs, 
or  the  interest  upon  that  gradually  diminishing  quantity  of  the  100,000 
francs  which  remains. ,  A  clearer  supposition  would  be  that  the  wealth  not 
saved  by  the  recipienfof  income  should  not  be  saved  by  anyone  else,  or  that 
the  income  which  is  not  saved  should  be  wholly  consumed. 


230  The  Economic  Synthesis 

employment  of  capital  increases  income  in  so  far  as  it  in- 
creases the  productivity  of  the  labour  of  the  one  who  saves, 
or  the  productivity  of  unitary  labour,  whereas  as  soon  as  this 
productivity  has  attained  its  maximum,  any  further  increase 
in  saving  does  not  effect  any  increase  in  the  income  of  the  one 
who  saves,  so  that  the  latter  has  no  further  reason  for  saving. 
Hence,  in  such  conditions,  individual  saving  is  arrested  within 
the  limit  previously  indicated,  at  which  it  would  be  established 
if  every  new  increase  of  saving  produced  a  further  increase  of 
income.  This  check  on  saving,  it  must  be  clearly  noted, 
manifests  itself  however  different  may  be  the  amount  of  the 
respective  individual  incomes,  since  each  of  these  incomes  can 
only  be  saved  in  that  measure  which  increases  the  maximum 
productivity  of  the  labour  of  the  recipient  of  income.  If  it 
be  desired  that  saving  shall  surpass  these  circumscribed 
limits,  it  is  necessary  that  the  authority  which  organises 
production  should  itself  prescribe  this  by  force  of  law.  We 
see  this,  for  example,  in  the  Indian  community,  where  the 
law  itself  determines  the  proportion  of  agricultural  income 
that  must  be  employed  in  the  maintenance  of  manufacturers. 

On  the  other  hand,  the  peremptory  limit  thus  imposed,  in 
the  case  of  undifferentiated  income,  upon  the  savings  of 
individuals,  attenuates  to  a  notable  extent  the  inequivalence 
of  individual  fortunes  ;  for  the  initial  inequivalence  of  the 
incomes,  whether  dependent  upon  difiFerences  in  personal 
capacity  or  upon  environing  conditions,  cannot  here  be 
increased  by  the  indefinite  progress  of  saving.  This  is  the 
explanation  of  the  fact  to  which  we  have  previously  referred 
(Chap.  Ill)  that  in  every  form  of  undifferentiated  income 
there  occurs  deliberate  human  intervention  for  the  maintenance 
of  equivalence  of  incomes  ;  for  such  intervention  could  not 
develop  efficiently,  and  indeed  would  be  hardly  conceivable, 
unless  the  organic  structure  of  that  form  of  income  imposed 
rigorous  restrictions  upon  the  disparity  of  individual  incomes. 

But  the  peremptory  limit  which,  in  this  form  of  income, 
arrests  individual  saving,  does  not  involve  the  imposition  of 
any  limit  upon  social  saving.  It  is,  in  fact,  implicit  in  the  very 
nature  of  this  form  of  income,  that  the  new  increments  of  the 
population  which  cannot  be  employed  by  new  savings  effected 
by  the  pre-existing  population — owing  to  the  fact  that  the 


The  Quantity  of  Income  231 

accumulation  of  capital  on  the  part  of  the  last-named  has  be- 
come arrested — shall  be  able  to  establish  themselves  upon  avail- 
able land,  and  to  practise  saving  there  on  their  own  account. 
For  if  they  were  unable  to  do  this,  they  would  have  to  offer  their 
labour  for  wages  to  the  producers  already  estabHshed,  and 
then  we  should  no  longer  have  undifferentiated  income,  since 
differentiated  income  would  take  its  place.  If,  as  is  by  hj^o- 
thesis  the  case,  the  income  remains  undifferentiated,  this  very 
fact  shows  that  the  new  increments  of  population  are  exempt 
from  the  need  of  selling  their  labour  to  the  owners  of  accumu- 
lated wealth,  that  is  to  say,  that  they  are  able  on  their  own 
account  to  proceed  to  the  saving  of  capital.  Hence  saving, 
while  it  ceases  among  the  producers  already  established,  is 
continued  among  the  producers  who  are  now  estabhshing 
themselves,  and  in  this  way  saving  continues  gradually  and 
without  any  Hmit. 

Altogether  different  in  character  are  the  phenomena  which 
make  their  appearance  in  the  case  of  differentiated  income. 
Here,  in  fact,  as  in  the  case  of  mixed  income,  to  which  in  this 
respect  differentiated  income  is  comparable,  the  recipient  of 
income  is  in  no  way  constrained  to  save  only  that  part  of  his 
income  which  can  increase  the  productivity  of  his  own  labour, 
but  can  save  as  much  more  of  it  as  he  pleases,  employing  as 
labourers,  slaves,  serfs,  or  wage-earners,  and  obtaining  from 
their  labour  an  increment  of  income  which  has  no  definite 
limits.  Hence,  unlimited  individual  saving  is  the  inseparable 
correlative  of  differentiated  income  ;  and  there  results  from 
this  a  maximum  expansion  of  individual  income  and  an 
extreme  and  increasing  inequivalence  in  the  amount  of  indi- 
vidual incomes.^    But  the  absence  of  limits  upon  individual 

^  The  contrast  thus  manifested  between  undifferentiated  and  differentiated 
income  is  substantially  coincident  with  that  pointed  out  by  Sombart  {De,r 
moderne  Kapitalismu^,  I,  pp.  xxxi-ii)  between  the  economy  for  subsistence 
and  the  economy  for  profit ;  but  this  writer  is  wrong  in  enimierating  among 
economies  for  subsistence  certain  forms  also  of  differentiated  income,  such  as 
the  feudal  economy,  forms  which  are  in  truth  economies  for  profit,  however 
much  this  may  be  attenuated  by  the  lesser  prevalence  of  exchange.  But 
Sombart's  terminology  (consistent,  for  the  rest,  with  his  theoretical  idealism) 
does  not  seem  to  me  acceptable — because  it  is  founded  upon  a  teleological 
criterion,  that  is  upon  the  purpose  which  the  organiser  of  the  productive 
enterprise  sets  before  himself,  instead  of  relating  to  the  objective  conditions 
of  the  economic  system  which  are  the  sole  and  undeniable  regulators  of  the 
measure  of  saving — and  further  because  it  does  not  correspond  to  reality.  In 
truth  it  cannot  be  admitted  that  in  some  economic  forms  man  puts  before 


232  The  Economic  Synthesis 

saving  does  not  exclude,  in  this  economic  form,  the  existence 
of  rigorous  Hmits  upon  social  saving.  For,  in  the  first  place, 
the  recipient  of  income  does  not  always  save  all  that  part  of 
income  whose  saving  would  procure  for  him  the  maximum 
totahsed  income  during  life  ;  and,  moreover,  differentiated 
income  being  the  appanage  of  only  a  small  minority  of  the 
population,  unlimited  individual  saving  may  give  rise  to  a 
comparatively  restricted  total  saving. 

This  limit  to  social  saving  which  is  inseparable  from  differ- 
entiated income  presents  a  diminishing  intensity  in  the 
successive  forms  of  that  income.  In  fact,  in  the  forms  of  income 
founded  upon  the  ownership  of  men,  saving  is  practically  non- 
existent.— Again,  at  the  court  of  Louis  XV  a  man  reputed  to 
save  was  generally  despised  ;  and  in  each  of  these  economic 
forms  it  is  necessary  to  enforce  by  law  that  a  given  part  of  in- 
come shall  be  devoted  to  the  maintenance  of  the  labourers,  that 
is,  that  it  shall  be  saved.  ^  Conversely,  in  the  forms  of  income 
founded  upon  ownership  of  the  land,  saving,  freely  effected  by 
the  recipient  of  income  with  a  sole  eye  to  his  own  advantage, 
acquires  an  elasticity  and  a  vigour  hitherto  unknown,  and 
attains  the  highest  hmits.  But  even  in  the  present  form  of 
income  people  are  a  long  way  from  following  the  advice  of  the 
good  Abbe  Baudeau,  that  one-third  of  the  income  should  be 
saved!*  It  has,  indeed,  been  calculated  that  even  in  the 
wealthiest  countries  capital  hardly  amounts  to  four  times  the 
annual  income,  and  this  denotes  a  comparatively  limited 
coefficient  of  accumulation.  ^ 

Parallel  with  the  unceasing  progress  of  saving  which  mani- 
fests itself  in  the  successive  forms  of  differentiated  income, 

himself  the  aim  of  obtaining  subsistence  alone,  and  in  others,  the  aim  of 
obtaining  profit.  In  every  case,  man  aims  at  obtaining  profit ;  but  it  is  by 
the  conditions  of  the  economic  system,  in  the  case  of  undifferentiated  income, 
that  the  amount  of  this  profit  is  limited,  or  is  kept  approximate  to  the  level 
of  subsistence,  whereas  in  the  case  of  differentiated  income,  the  conditions 
permit  the  unlimited  expansion  of  profit. 

^  Consult  Mossmann,  De  Vipargne  au  moyen  dge,  "  Revue  Historique," 
1879,  pp.  55,  et  seq. ;  Vanderkindere,  loc.  ciL,  p.  134  ;  Felix,  Moderne  Reich- 
thum,  Berlin,  1906,  p.  11.  We  must  also  take  into  accoimt  the  narrowness 
of  the  income  that  was  then  susceptible  of  being  saved.  A  calculation  made 
by  Davenant  shows  that  in  the  year  1688,  in  England,  the  maximimi  excess 
of  annual  income  over  expenditure  among  the  Lords  Spiritual  was  £20,  and 
the  minimum  among  the  working  tenant  farmers  was  ICte. 

*  Premiere  introduction  d  la  philosophic  economique,  edition  Daire,  p.  769. 

*  Chiozza-Money,  Riches  and  Poverty,  London,  1905,  p.  145. 


The  Qtimttity  of  Income  233 

there  may  be  noted  an  increasing  development  of  the  institu- 
tions which  promote  saving. — ^In  slavery  and  serfdom,  in 
both  of  which  saving  is  strictly  limited,  the  deposit  of  wealth  is 
either  altogether  unknown,  or  is  effected  quite  exceptionally 
in  the  temples  or  in  the  vaults  beneath  the  larger  habitations. 
Moreover,  in  these  economic  phases,  the  deposit  of  wealth  is  an 
act  of  hoarding  rather  than  that  of  saving  ;  and  even  the 
banks,  when  first  founded,  are  merely  institutions  for  hoard- 
ing, which,  far  from  paying  any  interest  to  the  depositor, 
exact  from  him  a  fee  for  safe-keeping,  undertaking  in  return 
not  to  lend  out  again  the  money  placed  in  their  care.  Hence, 
in  such  conditions,  the  income  stagnates  in  the  strong-box 
instead  of  being  diffused  through  the  irrigating  channels  of 
production.  It  is  only  in  comparatively  recent  times  that  the 
banks  have  become  the  potent  receivers  and  distributors  of 
saved  income,  whose  saving  and  increase  they  have  thus 
simultaneously  developed  and  promoted.  ^ 

The  quantity  of  saving  exhibits  differences  according  to  the 
kinds  and  degrees  of  income.  Certain  kinds  of  income  are 
saved  less  extensively  than  others  ;  and  an  EngHsh  writer 
of  the  middle  of  the  nineteenth  century  calculates  that  of 
profit  one-third  is  saved,  of  rent  less  than  this  proportion,  and 
of  wages  hardly  anything.  ^  On  the  other  hand,  if  it  be  true,  as 
Adam  Smith  maintains,  that  a  large  capital  with  a  low  rate  of 
profit  increases  more  rapidly  than  a  small  capital  with  a  high 
rate  of  profit,  it  is  no  less  true,  as  we  have  seen,  that  pro- 
fessional incomes,  usually  smaller,  must  be  saved  in  greater 
proportion  than  others,  and  that,  apart  from  this  consideration, 
the  larger  incomes  are  saved  in  lesser  degree,  or  are  devoted  in 
a  greater  degree  to  objects  not  productive  of  income  ;  this 
being  an  additional  explanation  of  the  statistically  ascertained 
fact  that  income  increases  at  a  rate  less  than  proportional  to 
the  increase  in  capitalised  property.  The  French,  therefore, 
who  measure  the  wealth  of  a  man  by  his  income,  are  more 

1  Warschauer,  "  Jahrbiicher  fiir  N,  CE.,"  1904,  p.  435.  The  first  design  for 
the  foundation  of  a  savings  bank  was  put  forward  in  England  in  the  years 
1798-9  by  Priscilla  Wakefield  and  the  Rev.  Joseph  Smith.  The  institution 
foimded  at  Hamburg  in  1778  was  not  a  true  savings  bank,  for  it  was  intended 
only  to  receive  the  deposits  of  domestic  servants  and  to  provide  for  them  an 
old  age  pension  (W.  Lewins,  History  oj  Banks  for  Saving  in  Great  Britain  and 
Ireland,  London,  1866,  pp.  ia-19). 

2  Morrison,  Essay  on  the  Relation  bettoeen  Labour  and  Capital,  London,  1864, 
pp.  34-6. 


234  The  Economic  Synthesis 

practical  and  clear-sighted  than  we  are  in  Italy  who  talk  at 
large  about  great  fortunes  without  paying  attention  to  the 
income  which  they  yield.  It  follows  from  this  that  the  con- 
centration of  income,  if  in  the  higher  incomes  saving  diminishes 
proportionally  as  compared  with  the  lower  incomes,  must 
diminish  the  total  quantity  of  saving.  For  example,  if  the 
total  income  1000  has  hitherto  been  distributed  in  the  form  of 
two  incomes  of  600,  and  one-half  of  these  incomes  has  been 
saved,  the  total  saving  is  500.  If  now  the  total  income  is 
distributed  in  the  form  of  two  incomes  of  750  and  250  re- 
spectively, and  if  saving  is  effected  to  the  extent  of  one-third 
of  the  former  and  four-fifths  of  the  latter,  the  total  saving  is 
460,  and  is  therefore  diminished.  But  if  the  saving  of  the 
larger  income  amounts  to  two-fifths,  the  total  saving  is  un- 
changed ;  if  the  saving  of  the  larger  income  amounts  to  48%, 
the  total  saving  is  increased. — ^Andsince  saving  involves  diminu- 
tion of  the  present  income  and  increase  of  the  future  product  and 
of  the  future  income,  the  concentration  of  income,  in  so  far  as  it 
has  the  effect  of  lessening  saving,  increases  the  total  present 
income  and  diminishes  the  total  future  product,  thus  exhibiting 
an  additional  manifestation  of  that  antagonism  between  product 
and  income  to  which  reference  has  previously  been  made. 

The  influences  which  restrict  saving  limit  correlatively  the 
increase  of  population  ;  for  it  is  evident  that  the  increment  of 
population  can  be  nourished  only  upon  the  wealth  that  is 
saved,  or  rather  upon  that  part  of  it  which  is  transformed  into 
subsistence. — Postulating  the  extreme  case  in  which  the  whole 
income  is  saved  and  the  whole  of  the  saving  consists  of  sub- 
sistence, the  quantity  of  superadded  population  for  which  a 
living  can  be  provided,  is  precisely  determined  by  the  income, 
or,  better,  by  the  excess  of  the  product  over  the  cost  of  pro- 
duction.^ If,  however,  the  increment  of  population  is  greater 
than  that  which  can  be  nourished  by  this  excess — ^limited,  as  it 
is,  by  the  very  regime  of  the  coercive  association  of  labour — 

^  To  these  conditions,  and  to  these  conditions  only,  is  applicable  the 
principle  of  Sismondi  (^oMwawa;  principe^,  II,  pp.  257,  et  seq.),  that  population 
is  limited  by  national  income  ;  because  the  income,  being  entirely  devoted  to 
saving,  constitutes  in  its  entirety  a  surplus  upon  which  the  increments  of 
population  can  live.  But  since  the  quantity  of  wealth  devoted  to  saving 
ceases  to  be  income,  it  would  be  more  correct  to  say  that  in  this  hypothesis 
the  population  is  limited  by  the  excess  of  the  product  over  the  redintegration 
of  the  expenditure  necessary  to  obtain  it 


The  Quantity  of  Income  235 

there  necessarily  arises  an  excess  of  population  in  relation  to 
the  means  of  subsistence,  and  therewith  poverty  and  destitu- 
tion.— ^It  follows  from  this  that  the  excess  of  population  in 
relation  to  the  means  of  subsistence  manifests  itself  as  the 
necessary  result  of  the  coercion  implicit  in  the  association  of 
labour,  independently  of  the  specific  or  concrete  forms  taken 
by  that  association. 

When  we  proceed  to  the  study  of  these  concrete  forms,  we 
find  that  in  the  case  of  undijfferentiated  income  the  increments 
of  population  can  certainly  estabhsh  themselves  upon  the 
available  lands,  and  can  there  save  for  themselves  the  wealth 
necessary  for  their  own  maintenance.  But  this  does  not 
exclude  the  possibility  that  the  scanty  productivity  of 
coercively  associated  labour  employed  upon  new  lands  of 
gradually  diminishing  fertility,  will  ultimately  no  longer  allow 
the  saving  of  sufficient  capital  for  the  complete  support  of  the 
producers  ;  that  is  to  say,  that  the  producers  who  have 
established  themselves  upon  the  lands  newly  put  under  cultiva- 
tion, will  suffer  from  poverty  or  even  from  destitution. — ^Now 
it  is  imphcit  in  this  form  of  income  that  poverty  cannot  affect 
only  the  increment  of  population,  but  must  be  diffused  through- 
out the  population  previously  established  ;  for,  were  this  not 
the  case,  the  established  population  would  be  placed  in  a 
privileged  position,  which  is  excluded  a  priori  in  this  economic 
form.  Hence  the  diminution  of  production  and  of  saving 
which  manifest  themselves  upon  the  lands  last  put  under 
cultivation,  will  have  its  ill  effects  diluted  by  the  extension  of 
these  throughout  the  entire  population,  and  this  process  will 
correlatively  attenuate  the  intensity  of  the  evil — ^that  is  to  say, 
there  will  arise  poverty  of  comparatively  slight  degree  equally 
diffused  throughout  the  population. 

This  is  precisely  what  we  find  in  the  most  varied  forms  of 
undifferentiated  income.  Thus,  among  the  Eskimos,  who  live 
by  hunting  and  fishing  in  an  economy  of  undifferentiated 
income,  there  not  infrequently  occurs  a  deficiency  of  the  means 
of  subsistence  in  relation  to  the  population,  leading  to  the 
slaughter  of  children,  old  people,  and  invalids.  The  same 
thing  occurs  among  the  Hottentots  and  among  the  Australian 
blacks.  No  less  frequent  and  no  less  acute  is  the  poverty  in 
the  mountainous  regions  of  Thibet,  and  in  other  sterile  parts 


236  The  Economic  Synthesis 

of  Asia  ;  where  recourse  is  had,  in  order  to  keep  down  the  birth- 
rate, to  polyandry,  to  cehbacy,  to  castration,  or  to  infanticide. ^ 
In  such  conditions,  however,  the  excess  of  population  over  the 
means  of  subsistence  is  rendered  less  pressing  and  less  frequent 
by  the  restriction  of  the  birth-rate  which  is  the  outcome  of 
undifferentiated  income.  For  it  is  precisely  the  personal  con- 
solidation of  subsistence  with  income,  or  of  labour  with  the 
means  of  production,  which  creates  a  sense  of  economic  re- 
sponsibility, and  renders  directly  ascertainable  the  influence 
exercised  by  an  excessive  birth-rate  in  compromising  individual 
well-being  ;  from  this  there  results  an  automatic  check  upon 
procreation,  which  is  kept  thereby  in  permanent  equiHbrium 
with  the  increase  in  subsistences. ^ 

Very  different  and  more  serious  are  the  phenomena  that 
manifest  themselves  in  the  case  of  differentiated  income.  In 
this  form  of  income,  the  quantity  of  wealth  (Hmited,  as  we 
have  seen)  saved  by  the  recipients  of  income  who  constitute 
a  more  or  less  inconsiderable  fraction  of  the  population,  or, 
better  expressed,  the  portion  of  that  quantity  of  wealth  which 
becomes  subsistences,  may  be  insufficient  to  nourish  all  the 
increment  of  population.  ^  In  this  case  a  part  of  this  increment 
of  population  is  condemned  to  destitution  and  to  death, 
whilst  the  remainder  is  sufficiently  nourished.  It  may  in- 
deed happen  that  the  quantity  of  subsistences  that  has  been 
saved  may  be  equally  distributed  among  the  pre-existent  and 
the  supplementary  labourers,  and  in  that  case  all  the  com- 
ponents of  the  labouring  population  are  reduced  to  an  in- 
sufficient nutriment.  But,  in  any  case,  the  excess  of  population 
over  the  means  of  subsistence  affects,  in  this  form  of  income, 
the  working  population  only,  leaving  immune  the  class  of  the 

*  Elie  Reclus,  Lt8  primitifs,  Paris,  1903,  pp.  40-52  ;  Cabiati,  Le  basi 
economiche  deUa  famiglia,  Milan,  1906. 

2  To-day,  also,  those  who  receive  a  fixed  income  are  less  fecund  than  those 
who  have  a  speculative  income  (Dumont,  Natalite  et  depopulation,  Paris,  1898, 
p.  225). 

3  To  the  thesis  of  Ricardo  {Works,  p.  51),  that  the  increase  of  capital 
determines  the  increase  of  population,  Marx  replies  with  the  diametrically 
opposed  thesis,  that  the  increase  of  population  determines  the  increase  of 
capital  {Mehrwerfhtheorien,  II,  2,  pp.  326-8).  Now  there  is  no  doubt  that  the 
increase  of  capital  is  directly  proportional  to  the  productivity  of  land  on  the 
margin  of  cultivation,  which  is  itself  inversely  proportional  to  the  density  of 
population.  But  it  is  no  less  certain  that  the  measure  in  which  capital 
increases,  rigorously  determines,  in  its  turn,  the  measure  in  which  the  employ- 
able population  increases. 


The  Qtimitity  of  Income  237 

recipients  of  income.  If,  in  consequence  of  a  high  birth-rate, 
the  number  of  these  last  undergoes  a  sensible  increase,  this 
simply  gives  rise  to  a  diminution  of  individual  income.  Now 
the  diminution  of  individual  income  may  diminish  the  total 
mass  of  income  which  comes  to  be  saved,  thus  diminishing  the 
increase  of  subsistence,  and  therewith  increasing  the  poverty 
of  the  working  class.  The  diminution  of  individual  income 
necessarily  leads  to  a  diminished  consumption  of  luxuries  on 
the  part  of  the  recipients  of  income.  But  this  diminution  of 
individual  income  can  in  no  way  compromise  the  subsistences 
of  the  recipients  of  income,  which  remain  unaffected  by  this 
change. — Thus,  whereas  in  the  case  of  undifferentiated  income 
the  excess  of  population  over  subsistences  creates  universal 
poverty,  in  the  case  of  differentiated  income,  it  suppresses  or 
diminishes  the  subsistence  of  a  portion  of  the  population,  while 
leaving  the  rest  of  the  population  unaffected. 

In  view  of  the  fact  that,  as  we  have  seen,  the  limit  upon 
saving  decreases  in  the  successive  forms  of  differentiated  income, 
it  is  logical  to  conclude  that  the  excess  of  population  over 
subsistences  should,  if  the  other  conditions  remain  constant, 
decrease  as  we  pass  from  one  of  these  economic  forms  to 
another.  In  fact,  however,  the  birth-rate  is  not  constant  in  the 
successive  forms  of  differentiated  income  ;  and  as  we  pass  from 
one  form  to  another  it  is  nowhere  found  to  exhibit  a  regular 
movement  either  of  ascent  or  of  descent,  but  is  subject  on  the 
contrary  to  very  considerable  irregular  oscillations.  In  the 
economic  form  based  on  the  ownership  of  men,  the  birth-rate 
is  restricted  and  oscillatory,  in  correlation  with  the  quantity 
of  subsistences  ^ ;  in  the  economy  of  the  systematic  wage- 
system,  the  birth-rate  presents  a  rapid  advance  ;  whereas 
in  the  economy  of  the  automatic  wage-system,  the  birth-rate 
exhibits  a  gradual  dechne.^  In  correlation  with  this,  the 
excess  of  population  also  presents  the  most  marked  oscilla- 
tions, and,  like  so  many  other  economic  phenomena,  takes  the 

1  In  the  seventeenth  century,  in  parallelism  with  the  diminution  of  wealth 
and  of  subsistences,  there  occurs  a  fall  in  the  birth-rate  ;  in  consequence  of 
this  there  arises  a  casuistry  to  justify  infecund  sexual  intercourse,  and  there 
develops  witchcraft,  because  it  teaches  abortion  (Michelet,  Histoire  de  France, 
XIII,  pp.  212-3). 

'  See,  for  example,  Mombert,  Studien  zur  Bevolkerungabewegung  in  DetUsch- 
land,  Karlsruhe,  1907,  pp.  129,  et  aeq.,  pp.  263,  et  seq. 


238  The  Economic  Synthesis 

form,  as  time  passes,  of  a  regular  parabola  ;  thus  it  exhibits  a 
gradual  elevation  down  to  the  end  of  the  economy  of  the 
systematic  wage-system,  to  decline  progressively  during  the 
automatic  wage-system,  until  finally  the  excess  may  even 
disappear. — But  the  limits  upon  production  pecuhar  to  labour 
coercively  associated  exclude  in  every  case  the  possibility  of  a 
permanent  and  unchangeable  equihbrium  between  population 
and  subsistences,  and  at  all  times  involve  the  possibility  that 
the  excess  of  population  which  has  been  temporarily  annulled 
may  reappear,  bringing  in  its  train  all  the  miseries  of  poverty 
and  death. 

In  conclusion,  the  quantity  of  saving  is  a  function  of  two 
variables,  the  quantity  of  the  product  and  the  fraction  of  the 
product  which  is  saved.  The  coercive  association  of  labour,  the 
basis  of  all  the  forms  of  income,  imposes  upon  the  quantity  of 
the  product  limitations  which  gradually  decrease  during  the 
successive  phases  of  association.  The  structure  of  income  im- 
poses limitations,  gradually  decreasing,  upon  saving,  individual 
or  total,  or  upon  that  part  of  saving  which  is  productively  em- 
ployed. Thus  there  arises  a  twofold  series  of  influences,  one 
group  of  these  dependent  upon  the  coercive  association  of 
labour,  and  the  other  group  dependent  upon  the  structure  of 
income  ;  and  the  result  of  these  influences  is  to  limit  directly 
or  indirectly,  but  to  a  decreasing  extent,  saving,  or  productive 
saving.  Whenever  the  birth-rate  exceeds  a  determinate 
measure,  the  inevitable  outcome  of  these  influences  is  the 
production  of  an  excess  of  population. 

Thus,  then,  the  absolute  quantity  of  income  is  a  function 
of  the  following  elements  :  (1)  the  quantity  and  productivity 
of  associated  labour ;  (2)  the  wear  of  technical  capital ; 
(3)  the  productivity  of  isolated  labour  ;  (4)  the  quantity  of 
product  assigned  to  the  labourer  ;  (5)  the  quantity  of  saving. — 
But  since  elements  1  and  3  can  be  reduced  to  a  single  one,  the 
absolute  quantity  of  income  depends  upon  the  four  following 
factors  :  productivity  of  labour,  wear  of  technical  capital, 
quantity  of  product  assigned  to  the  labourer,  quantity  of  saving. 

These  factors  upon  which  the  mass  of  the  income  depends 
present  in  their  turn  a  varying  intensity  according  as  there  are 
variations  in  the  forms,  the  kinds,  and  the  degrees  of  income. 


The  Quantity  of  Income  239 

In  fact,  the  various  forms,  kinds,  and  degrees  of  income  give 
rise  to  a  coercion  to  the  association  of  labour  varying  in 
intensity,  and  from  this  there  resuh  :  variations  in  the  pro- 
ductive efficiency  of  labour  itself  ;  varying  degrees  of  reduction 
in  the  quantity  of  product  assigned  to  the  labourer  ;  variations 
in  the  quantity  of  saving  ;  and  therefore,  according  to  the 
varying  predominance  of  the  different  forms,  kinds,  or  degrees 
of  income,  there  result  also  correlative  variations  in  the  total 
quantity  of  income. 

Conversely,  the  total  quantity  of  income  reacts  upon  the 
form,  the  kind,  or  the  degree  of  income.  It  is,  in  fact,  certain 
that,  when  the  total  quantity  of  income  decHnes,  the  prevaiHng 
form  of  income  is  compromised,  and  is  most  likely  to  be 
replaced  by  a  different  form  of  income.  On  the  other  hand, 
during  the  ascendent  periods  of  any  form  of  income,  con- 
solidated incomes  prevail  over  fluctuating  incomes,  whereas 
during  the  dechning  periods  the  opposite  of  this  is  the  case. 
Finally,  for  this  very  reason,  during  the  ascendent  periods  of 
income,  the  process  of  expansion  of  one  individual  income  at 
the  expense  of  another  individual  income  is  less  intense,  and 
the  concentration  of  income  in  its  superior  degrees  resulting 
from  that  process  is  less  marked,  than  are  both  of  these  in  the 
dechning  periods  of  income. 

In  any  case,  given  the  prevaiHng  forms,  kinds,  and  degrees 
of  income,  and  the  conditions  these  severally  impose,  that 
complex  of  factors  tends  to  become  estabHshed  which  gives 
rise  to  the  maximum  income,  immediate  or  permanent ;  and 
this  income  is  saved  to  a  sufficient  extent  to  secure  to  the 
recipient  of  income  the  maximum  totaHsed  income  during  Ufe, 

§  2.  The  Rate  of  Income 

Having  thus  determined  the  absolute  quantity  of  income, 
we  have  next  to  determine  its  relative  quahty,  or  the  rate  of 
income,  which,  as  we  know,  is  equal  to  the  quotient  obtained 
by  dividing  the  total  absolute  income  by  the  factors  from 
which  it  is  derived. — ^Now  since  these  factors  do  not  neces- 
sarily consist  of  the  same  products  as  those  which  con- 
stitute the  income,  in  order  to  determine  the  rate  of  income 
we    must    first    reduce    to    a    common    denominator    the 


240  The  Economic  Synthesis 

products  constituting  the  income  and  the  products  necessary 
to  produce  it,  or  must  assume  as  the  basis  of  our  calculations, 
instead  of  the  products  themselves,  their  value  measured,  in 
efiFective  labour  (wherever  possible),  or  in  complex  labour,  or 
else  in  money  ;  thus  the  rate  of  income  is  equal  to  the  value  of 
the  income  divided  by  the  value  of  the  elements  that  produce  it. 

Precisely  because  the  rate  of  income  is  the  ratio 
between  the  absolute  income  and  the  respective  productive 
elements  from  which  it  is  derived,  we  can  recognise  as  many 
different  rates  of  income  as  there  are  productive  elements, 
that  is  to  say,  we  have  the  rate  of  income  in  relation  to  labour, 
in  relation  to  technical  capital,  and  in  relation  to  land. 

The  rate  of  income  determined  in  relation  to  the  quantity 
of  labour  measures  the  productivity  of  associated  labour.  If, 
for  example,  in  a  certain  country,  A,  100  days  of  associated 
labour  produce  an  income  of  50,  and  in  another  country,  B, 
200  days  of  labour  produce  an  income  of  50,  the  rate  of  income 
in  the  former  country  is  50%,  and  in  the  latter  25%  ;  that 
is  to  say,  the  productivity  of  associated  labour  is  in  the  former 
country  double  what  it  is  in  the  latter.  If  the  income  be 
considered  in  relation  to  subsistence  instead  of  in  relation 
to  labour,  and  if  subsistence  be  equal  to  the  specific  product  of 
isolated  labour  employed  in  conjunction  with  a  correlative 
technical  capital,  the  ratio  between  subsistence  and  in- 
come denotes  at  the  same  time  the  ratio  between  the 
product  of  isolated  labour  and  the  product  of  associated 
labour,  and  between  the  part  of  the  product  assigned  to  labour 
and  that  assigned  to  ownership  of  the  means  of  production. 
If  subsistence  is  (as  we  saw  frequently  happens)  inferior  to 
the  product  of  isolated  labour,  the  ratio  between  sub- 
sistence and  income  indicates  simply  the  ratio  between 
the  quota  accrueing  to  labour  and  the  quota  accrueing  to 
property.  If,  finally,  the  labourer  receives  a  part  also  of 
income,  in  addition  to  the  product  of  isolated  labour  con- 
stituting the  maximum  limit  of  subsistence,  the  ratio 
between  subsistence  and  income  indicates  simply  the  ratio 
between  the  productivity  of  isolated  labour  and  that  of 
associated  labour. 

If  the  rate  of  income  be  determined  in  relation  to  technical 
capital,  it   expresses   the  productivity  of  technical  capital, 


The  Quantity  of  Income  241 

and  is  greater  in  proportion  as  the  ratio  of  the  technical 
capital  to  the  absolute  income  is  less.  If  it  be  determined  in 
relation  to  the  total  capital,  subsistences  together  with  tech- 
nical capital,  that  is  to  say,  by  dividing  the  value  of  the  income 
by  the  value  of  the  total  capital,  it  expresses  in  part  the 
distribution  of  the  product  between  capital  and  labour,  and 
in  part  the  productivity  of  technical  capital. — ^If,  on  the 
other  hand,  the  rate  be  determined  in  relation  to  land,  the 
rate  of  income  expresses  the  productivity  of  the  land,  and  is 
greater  in  proportion  as  the  ratio  of  the  extension  of  land 
to  the  absolute  income  is  less. 

Finally,  the  rate  of  income  may  be  determined  in  correla- 
tion with  the  sum  of  the  three  productive  factors.  But  this 
may  give  rise  to  difficulty  as  regards  the  valuation  of  these 
elements.  There  is  no  difficulty  in  the  case  of  labour,  for  to 
the  charge  of  labour  may  be  assigned  the  value  of  the  sub- 
sistences ;  again,  the  value  of  technical  capital  is  immediately 
determined  by  the  cost  of  the  products  of  which  it  consists. — 
But  the  matter  is  less  easy  as  concerns  land.  For  if  to  the 
extension  of  the  land  (an  element  not  really  calculable  in 
money),  we  charge  its  value  reckoned  in  terms  of  capitalised 
rent,  the  greater  productivity  of  the  land  is  reflected  in  an 
elevation  in  the  value  of  this  land  ;  thus  every  increase  in 
the  income  (the  numerator)  due  to  the  greater  productivity  of 
the  land,  is  accompanied  by  a  proportional  increase  in  the  value 
expended  (the  denominator).  Therefore  the  rate  of  income 
remains  constant,  notwithstanding  the  increase  in  the  produc- 
tivity of  the  land;  that  is  to  say, the  rate  of  income  has  no  longer 
anything  to  do  with  the  technical  efficiency  of  the  natural 
element  of  production.^     To   obtain  some  light   upon  this 

1  In  the  same  sense,  consult  Fisher,  Income,  p.  187.  For  this  very  reason 
Huschke  affirms  that  by  determining  income  in  relation  to  the  value  of  the 
land  it  is  possible  to  measure  all  the  factors  of  variation  of  income  which  are 
independent  of  the  varying  fertility  of  the  soil  {Landwirtschajtliche  Reiner- 
tragsberechnungen,  Jena,  1902).  This  difficulty,  which  arises  in  every  case  in 
respect  of  the  determination  of  the  rate  of  income  in  relation  to  the  land, 
also  presents  itself  in  respect  of  the  determination  of  the  rate  of  income  in 
relation  to  capital  when  capital  is  valued  in  terms  of  capitalised  interest — as 
Fisher  wishes  to  do  {Income,  p.  202,  Rate  of  Interest,  p.  130),  and,  formerly, 
Chaptal  ;  because,  in  such  a  case,  the  variations  arising  in  the  productivity  of 
capital  certainly  change  the  value  of  the  capital,  but  leave  the  rate  of  income 
unaffected.  Such  a  method  of  determining  the  value  of  capital  is,  however, 
totally  inadmissible,  as  I  have  previously  pointed  out  in  the  Rivista  di  Scienza, 
Anno  II,  No.  vi. 


242  The  Economic  Synthesis 

question,  we  must  therefore  consider  the  value  of  the  land  as 
constant  :  it  may  be  by  determining  that  value  independently 
of  its  productivity  ;  it  may  be  by  considering  all  the  lands  as 
having  the  fertihty  of  land  on  the  margin  of  cultivation,  and 
therefore  having  a  zero  value  ;  it  may  be  by  assuming  the 
value  of  the  land  to  be  equal  to  the  value  of  the  subsistence  of 
the  labourers  who  cultivate  it,  which  value  does  not  neces- 
sarily change  with  changes  in  the  productivity  in  the  land 
itself.  In  this  way,  every  increment  in  the  productivity  of 
the  land  increases  the  income  without  increasing  the  value 
of  the  land,  and  therefore  without  increasing  the  total  cost  of 
production  of  the  income  ;  so  that  the  greater  fertility  of  the 
land  is  reflected  in  a  higher  rate  of  income. 

If  the  element  of  land  be  abstracted  from  the  problem,  or 
be  considered  constant,  the  rate  of  income  becomes  a  function 
of  three  variables,  the  absolute  value  of  the  income,  the  value 
of  the  technical  capital,  and  the  value  of  the  subsistences 
necessary  to  produce  the  income  ;  but  as  the  technical  capital 
and  the  subsistences  may  be  subsumed  under  the  general 
term  of  capitaly  it  may  be  said  that  the  rate  of  income  is  a 
function  of  two  variables,  the  value  of  the  income  and  the 
value  of  the  capital. — Since,  then,  the  value  of  the  income 
is  a  function  of  the  unitary  value  of  the  income-products 
and  of  the  absolute  quantity  of  income,  it  follows  that  the 
rate  of  income  must  vary  with  variations  in  the  elements  that 
determine  the  absolute  quantity  of  income — ^with  variations, 
that  is  to  say,  in  the  quantity  and  productivity  of  labour,  in 
the  wear  of  technical  capital,  in  the  quantity  of  subsistence, 
and  in  the  quantity  of  saving. 

There  result  from  this  certain  qualitative  and  certain 
quantitative  differences  between  the  rate  of  income  and  the 
rate  of  profit.  First  of  all,  the  elements  that  determine  the 
rate  of  income  are  not  the  same  as  the  elements  that  deter- 
mine the  rate  of  profit.  In  fact,  the  rate  of  profit  is  indepen- 
dent of  the  more  or  less  considerable  fraction  of  income  that 
is  saved  ;  whereas  the  rate  of  income  varies  inversely  with  the 
quantity  of  saving.  Secondly — ^and  here  we  have  a  more 
substantial  difference — ^the  rate  of  profit  is  determined  by 
the  distribution  of  the  subsistence-product  between  the 
capital  and  the  labour  employed  to  produce  it,  and  this 


The  Quantity  of  Income  243 

distribution  varies  in  its  turn  in  proportion  to  the  productivity 
of  the  labour  producing  the  subsistence-commodity  and  the 
technical  capital  requisite  to  produce  this.  Therefore  the  rate 
of  profit  remains  unaffected  by  variations  in  the  productivity 
of  the  labour  employed  in  the  production  of  the  income- 
commodities  and  of  the  technical  capital  requisite  to  produce 
these. — Conversely,  the  rate  of  income  rises  (or,  in  the 
inverse  case,  declines),  not  only  at  every  increase  in  the 
productivity  of  the  labour  that  produces  subsistence  (which 
increase,  by  increasing  the  rate  of  profit,  increases  for  that 
very  reason,  ceteris  paribus,  the  rate  of  income),  but  also  at 
every  increase  in  the  productivity  of  the  labour  employed 
to  produce  the  commodities  constituting  the  income  (or  the 
technical  capital  requisite  to  produce  these  commodities), 
provided  that  this  increase  of  productivity  be  not  accom- 
panied by  a  proportional  diminution  in  the  unitary  value 
of  the  commodities  themselves.  In  fact,  if  the  increase  in 
the  productivity  of  the  labour  that  produces  the  income- 
commodities  diminishes  the  unitary  value  of  these  in  proportion 
as  the  absolute  quantity  of  income  increases  (as  happens  if 
they  are  produced  in  conditions  of  free  competition),  it  leaves 
unchanged  the  value  of  the  income,  and  therefore  leaves  un- 
changed also,  if  the  value  of  subsistence  and  of  technical 
capital  remain  constant,  the  rate  of  income.  But  if  the 
increase  in  the  productivity  of  the  labour  that  produces 
the  income-commodities  does  not  diminish  the  unitary  value 
of  these,  or  does  not  diminish  that  value  proportionally  to  the 
increase  in  the  absolute  quantity  of  income,  as  happens  when 
they  are  not  obtained  in  conditions  of  free  competition,  the 
value  of  the  income  increases  while  the  value  of  the  technical 
capital  and  of  the  subsistences  remains  constant.  This  does 
not  raise  the  rate  of  profit,  which  remains  in  every  case  deter- 
mined by  the  conditions  of  distribution  of  the  subsistence- 
product  ;  but  it  necessarily  increases  the  rate  of  income. 

Thus  our  analysis  leads  us  to  a  conclusion  diametrically 
opposed  to  that  enunciated  by  Marx. — ^This  writer  affirms  that 
the  rate  of  surplus- value,  that  is  to  say,  the  rate  of  income, 
varies  solely  in  accordance  with  the  variations  in  the  pro- 
ductivity of  the  labour  producing  the  commodities  of  con- 
sumption of  the  workers  (or  the  technical  capital  necessary 


244  ^^^^  Economic  Synthesis 

to  produce  these) ;  whereas  the  rate  of  profit  may  vary  through 
a  variation  in  the  technical  composition  of  the  capital  em- 
ployed in  the  production  of  every  commodity.  In  reaHty, 
the  opposite  of  this  is  the  truth.  The  rate  of  profit  may  vary 
solely  in  consequence  of  variations  in  the  productivity  of  the 
labour  employed  in  the  direct  or  indirect  production  of  the 
commodities  of  consumption  of  the  workers  ;  whereas  the  rate 
of  income  may  vary,  not  only  in  accordance  with  every  varia- 
tion in  the  productivity  of  the  labour  that  directly  or  in- 
directly produces  subsistences,  but  also  in  accordance  with 
every  variation  in  the  productivity  of  the  labour  that  directly 
or  indirectly  produces  income  :  that  is  to  say,  to  express  the 
matter  in  more  general  terms,  the  rate  of  income  may  vary 
with  every  variation  in  the  productivity  of  labour,  however 
employed. 

On  the  other  hand,  since  technical  capital  and  subsistences 
produce  profit  and  all  the  other  parts  of  income,  the  rate  of 
income — equal  to  the  value  of  the  total  income  divided  by 
the  total  technical  capital  and  the  total  subsistences — ^has 
a  denominator  equal  to  that  which  determines  the  rate  of 
profit  (if  we  leave  out  of  consideration  that  part  of  income 
which  is  saved),  but  it  has  a  numerator  which  is  necessarily 
greater  ;  that  is  to  say,  the  rate  of  income  is  always  greater 
than  the  rate  of  profit. 

Like  the  rate  of  integral  income,  the  rate  of  the  total 
incomes  of  various  kinds  can  also  be  determined  in  correlation 
with  each  of  the  productive  elements  separately,  or  with  the 
totality  of  these. — But  here  it  is  necessary  to  point  out  that 
the  different  productive  elements  intervene  in  varying  pro- 
portions in  the  production  of  various  kinds  of  income,  and  that 
for  this  reason  the  different  rate  of  the  various  kinds  of  income, 
when  measured  in  correlation  with  one  and  the  same  pro- 
ductive element,  does  not  furnish  any  absolute  information 
as  to  the  productivity  of  this  particular  element.  Thus,  for 
example,  commercial  capital  is  employed  practically  without 
making  use  of  any  portion  of  land,  whereas  agrarian  capital 
requires  a  large  quantity  of  land  for  its  employment.  It 
follows  from  this  that  the  rate  of  income  in  the  case  of  com- 
mercial capital,  measured  relatively  to  the  land,  is  enormously 
higher  than  that  of  agrarian  capital,  without  this  difference 


The  Quantity  of  Income  245 

denoting  a  greater  productivity  of  the  land  in  the  former 
case  as  compared  with  the  latter. 

One  observation  in  conclusion.  We  have  already  seen  that 
income  tends  to  impose  that  quantity  of  product  and  of 
subsistence  which  raises  income  itself  to  the  maximum  figure. 
But  if  there  are  several  combinations  of  quantity  of  product 
and  of  subsistence  which  yield  the  maximum  income,  that 
combination  is  preferred  which  yields  the  maximum  rate  of 
income.  And  if  there  are  several  combinations  which  yield 
the  maximum  income  and  the  maximum  rate  of  income,  that 
combination  is  preferred  which  yields  the  maximum  product  ; 
for,  the  conditions  being  otherwise  unchanged,  it  is  to  the 
general  interest,  including  that  of  the  recipient  of  income, 
that  the  product  shall  be  greater. — ^Thus,  if  two  different 
combinations  give  an  income  of  100  and  a  rate  of  income  of 
J,  but  one  combination  employs  a  capital  of  300  with  zero 
wear,  and  the  other  a  capital  of  300  with  total  wear, 
the  product  is  in  the  former  case  100,  and  in  the  latter 
case  400.  In  such  conditions,  the  second  combination  will 
be  preferred. 

§  3.  Quantitative  Tendencies  of  Income 

We  have  now  to  ask  whether  the  total  income  thus  deter- 
mined aUke  in  its  initial  quantity  and  in  its  successive  incre- 
ments, tends  to  increase  or  to  diminish  in  the  successive 
forms  of  income,  or  in  the  successive  phases  of  one  and  the 
same  form  of  income.  When  we  consider  the  forms  of  income 
in  their  normal  or  ascendent  period,  it  is  not  difficult  to  ascer- 
tain that  the  total  quantity  of  income  is  greater  in  each 
successive  form. — In  fact,  in  each  successive  form  of  income 
there  is  an  increase  in  the  productivity  of  associated  labour, 
which  is  itself  the  primary  determinant  of  the  absolute  quantity 
of  income.  It  is  true  that,  in  the  course  of  economic  develop- 
ment, technical  capital  and  its  wear  and  tear  increase,  and 
the  quantity  of  subsistence  may  increase  ;  but  since  technical 
capital  and  subsistence  increase  only  in  so  far  as  they  increase 
income,  an  increase  in  these  elements  cannot  counteract 
the  increase  of  income,  but  must  render  this  last  more  marked. 
— Finally  it  is  true  that,  in  each  successive  phase  of  income, 


246  The  Economic  Synthesis 

there  is  an  increase  in  the  impulse  to  saving,  or  a  depression 
of  the  limits  which  restrain  saving  within  the  virtual  maxi- 
mum. But  it  is  no  less  true  that  the  diminution  which  im- 
mediately results  from  this  in  the  figure  of  the  absolute  income 
gives  rise  to  a  progressive  increase  in  its  figure  in  the  future, 
through  the  increased  profits  which  are  ultimately  derived 
from  saving. — ^The  definite  and  necessary  result  of  all  this  is 
a  progressive  increase  in  the  absolute  quantity  of  income  in 
each  successive  form. 

What  has  been  said  of  the  successive  forms  of  income  is 
equally  applicable  to  successive  periods  in  the  ascendent 
phase  of  each  form  of  income  ;  and  there  contributes  in 
addition  to  bring  about  the  same  result  the  increasing  pre- 
dominance of  consolidated  incomes,  which  are  less  influential 
in  restricting  production.  Therefore  in  the  ascendent  phase 
of  each  form  of  income,  the  total  mass  of  income  exhibits  a 
progressive  increase. 

But  the  opposite  phenomena  make  their  appearance  as 
soon  as  the  declining  phase  of  the  income  begins  ;  for  in  this 
phase,  'pari  passu  with  the  decline  in  the  productive  efficiency 
of  associated  labour,  a  diminution  in  the  mass  of  income 
becomes  manifest,  and  gradually  more  accentuated.  This 
becomes  apparent  in  the  decline  of  the  communistic  and  of 
the  corporative  economy,  as  also  towards  the  close  of  the 
slave  economy  ;  whilst  the  diminution  of  the  feudal  income 
during  the  decline  of  the  feudal  economy  was  plainly  displayed 
in  the  decadence  of  the  arts  and  in  the  break  up  of  the 
seignorial  households  ;  finally,  the  same  thing  occurs  under 
our  own  eyes  during  the  decline  of  the  wage-economy.  Thus, 
in  England,  the  depression  in  trade  of  the  year  1885  is  followed 
by  a  diminution  of  total  income  in  1886-7  ;  the  depression 
of  1893  leads  to  a  diminution  of  the  total  income  in  1894-5 
and  in  1897  ;  whilst  in  the  triennial  period  1903-6  the  total 
amount  of  property  passing  through  the  estate  office  is 
£815,253,640,  as  compared  with  the  sum  of  £828,841,140, 
during  the  triennial  period  immediately  preceding^ ;  and  besides 
this  there  are  manifest  the  most  significant  symptoms  of 
the  decline  of  income,  such  as  the  reduction  and  sometimes 

1  Harris  and  Lake,  Estimates  of  the  Realisable  Wealth  of  the  United  Kingdom, 
"  Journal  Stat.  Soc,"  1906,  p.  726. 


The  Quantity  of  Income  247 

the  total  suppression  of  railway  dividends,  and  an  alarming 
increase  in  pauperism. 

If,  however,  in  place  of  considering  the  total  income  of  a 
single  country  in  successive  periods  of  time,  we  consider  the 
total  income  of  a  number  of  contemporary  countries,  we  find 
that  this  income  is  greater  in  those  countries  in  which  the 
coercion  of  labour  is  less  intense,  and  in  which  therefore  the 
productive  efficiency  of  Jabour  is  greater.  And  since  the 
intensity  of  the  coercion  to  the  association  of  labour  is,  as  we 
know,  inversely  proportional  to  the  productivity  of  the  land, 
it  follows  that  the  quantity  of  the  total  income  relatively  to 
the  number  of  the  population,  is  greater  in  those  countries 
in  which  the  productivity  of  the  soil  is  less.  This  becomes 
manifest  when  we  compare  the  countries  of  continental 
Europe  with  England,  for  the  increase  in  the  total  income  is 
greater  in  England  than  in  the  other  countries  of  Europe. 

Income,  in  addition  to  increasing  in  absolute  quantity 
during  progressive  periods  or  in  the  case  of  progressive  nations, 
tends  to  increase  more  than  proportionally  to  the  increase  in 
the  factors  requisite  for  its  production ;  hence  also  the  rate 
of  income  necessarily  rises.  First  of  all,  in  highly  evolved 
conditions  of  the  economy,  income  increases  more  than 
proportionally  to  subsistence. — ^It  is  doubtless  possible  (as 
we  have  seen)  that  an  increment  of  subsistence  may  occur 
more  than  proportional  to  the  increase  of  income.  But  since 
subsistence  has  a  maximum  which  is  determined  by  the 
product  of  isolated  labour,  the  moment  necessarily  arrives  in 
which  subsistence  can  no  longer  increase  ;  and  henceforward 
every  increment  of  product  resolves  itself  entirely  into  an 
increment  of  income,  undifferentiated  or  differentiated. 
Now,  if  income  increase  while  subsistence  remains  constant, 
the  moment  necessarily  comes  in  which  the  total  income 
exceeds  the  total  subsistence  ;  and  this  excess  must  be  greater 
in  proportion  to  any  increase  in  the  productivity  of  labour. 
In  other  words,  in  advanced  economic  conditions,  the  total 
income  represents  a  fraction  of  the  total  product  larger  than 
that  which  is  constituted  by  the  total  subsistence,  and  this 
disproportion  continually  increases. 

In  an  ascendent  economy,  however,  the  ratio  between  in- 
come and  technical  capital  is  also  an  increasing  one  ;  for,  the 


248  The  Economic  Synthesis 

greater  the  advance  of  technique,  the  greater  is  the  mass  of 
income  produced  by  a  given  technical  capital.  Now  if,  in 
ascendent  periods,  the  absolute  income  increases  more  than 
proportionally  to  the  subsistences  and  to  the  technical  capital, 
it  follows  from  this  that  in  these  periods  the  rate  of  income 
tends  continually  to  increase  ;  herein  is  to  be  found  an  essential 
difference  between  the  rate  of  income  and  the  rate  of  profit, 
for  during  ascendent  periods  the  latter  rate  diminishes. — 
Conversely,  during  declining  periods  the  rate  of  income  tends 
correlatively  to  diminish. 

If,  finally,  during  ascendent  periods,  there  is  an  increase  in 
the  quotient  that  is  obtained  by  dividing  income  by  the  sum 
of  technical  capital  and  subsistences,  there  is,  for  that  very 
reason,  an  increase  in  the  quotient  obtained  by  dividing 
income  by  the  sum  of  technical  capital  used  up,  subsis- 
tences, and  income  itself.  Since  this  last  sum  is  equal  to  the 
total  product,  it  follows  that,  in  the  course  of  every  ascendent 
phase  of  income,  income  constitutes  an  increasing  fraction  of 
the  product.  In  fact,  in  England  from  1860  to  1901-2,  whilst 
the  average  income  per  inhabitant  increases  by  88%,  the  aver- 
age product  increases  by  72%^^ ;  that  is  to  say,  income  in- 
creases in  a  greater  ratio  than  product,  or  income  constitutes 
an  increasing  fraction  of  product. 

^  Jason,  Die  Entwickelung  der  Einkommen^verhdUnisse  in  Groasbritannien, 
Heidelberg,  1905,  p.  56. 


CHAPTER   VI 

THE  DISTRIBUTION   OF  INCOME 

§  I.  The    Struggle    Between    Individual    Incomes 

Hitherto  we  have  studied  income  as  a  whole,  its  forms,  the 
kinds  into  which  it  is  subdivided,  its  total  quantity.  But, 
as  we  have  previously  indicated,  income  is  an  essentially 
individual  attribute,  inasmuch  as  it  is  by  individuals  that  it 
is  received  and  consumed.  For  this  reason,  the  analysis  of 
income  cannot  be  regarded  as  being  exhaustively  effected  by 
the  study  of  income  as  a  whole,  and  the  analysis  must  be  com- 
pleted by  an  investigation  of  the  phenomena  appertaining  to 
income  as  it  is  received  by  individuals. 

The  average  individual  income,  it  is  hardly  necessary  to 
say,  is  equal  to  the  total  income  divided  by  the  total  number 
of  the  recipients  of  income.  Now,  in  the  case  of  undifferen- 
tiated income,  the  number  of  the  recipients  of  income  is 
precisely  equal  to  the  number  of  the  productive  labourers  ; 
whereas  in  the  case  of  differentiated  income,  the  number  of 
the  former  is  necessarily  less  than  the  number  of  the  latter. 
This  is  already  imphed  by  the  fact  that  in  the  case  of  differen- 
tiated income  a  single  private  owner  of  the  means  of  pro- 
duction (or  it  may  be  of  unproductive  elements)  exercises 
coercion  over  a  number  of  associated  labourers  ;  for  this 
implies  that  to  a  pluraUty  of  productive  (or  unproductive) 
labourers  there  corresponds  a  single  owner  of  productive 
(or  unproductive)  elements.  It  is  true  that  the  recipients  of 
income  do  not  consist  solely  of  the  owners  of  productive  or 
unproductive  elements,  but  in  addition  of  unproductive 
labourers  who  obtain  an  income  ;  but  the  presence  of  these  last 
does  not  materially  modify  the  result,  or  affect  the  fact  that 
the  number  of  the  recipients  of  income  is  in  any  case  necessarily 
inferior  to  that  of  the  labourers.  This  statement  is  statistically 
confirmed  ;  thus,  for  example,  in  Prussia,  in  the  year  1906, 
those  exempt  from  income  tax,  that  is  to  say,  the  labourers, 

849 


250  The  Economic  Synthesis 

constitute  60-35%  of  the  population,  whilst  those  who  pay- 
income  tax  (or  the  recipients  of  income)  form  only  39-65%  of 
the  population^ ;  and  in  the  United  Kingdom  the  wage- 
earners  represent  four-fifths  of  the  total  population. 

Now,  since  we  have  seen  that  in  an  advanced  economy  the 
total  income  is  superior  to  the  total  subsistence,  and  that  this 
preponderance  of  income  continually  increases,  and  since  we 
have  now  seen  that  the  number  of  the  recipients  of  income  is 
equal  to  or  less  than  the  number  of  the  productive  labourers, 
it  necessarily  follows  that  the  average  individual  income  is 
normally  greater  than  the  average  individual  subsistence, 
and  that  the  disproportion  between  the  two  continually  in- 
creases. By  statistics  this  is  proved  beyond  the  possibility 
of  doubt.  Thus  in  Prussia,  in  the  year  1902,  whilst  the  average 
wage  was  estimated  at  883-30  marks,  the  average  income  of 
those  subject  to  income  tax  was  2277  marks. — ^In  England, 
during  the  period  from  1890  to  1901-2,  whilst  the  average 
wage  increases  by  55%,  the  average  income  per  inhabitant 
increases  by  88%  ;  and  in  the  United  States,  from  1890  to 
1905,  whilst  the  average  wage  increases  by  12-8%,  the  average 
income  produced  by  a  single  worker  increases  by  33-3%. ^ 

But  the  average  individual  income  is  not  only  devoid  of  all 
symptomatological  value  (for  a  high  average  income  may 
go  together  with  a  low  rate  of  income  and  therefore  with  a 
low  productivity  of  capital  and  labour,  if  the  mass  of  capital 
and  labour  employed  be  great,  and  may  in  addition  coexist 
with  a  low  level  of  individual  income  in  the  case  of  the  great 
majority  of  the  recipients  of  income)  ;  it  is,  moreover, 
a  fictitious  entity  having  no  counterpart  in  actual  life,  for 
life  presents  to  us  a  series  of  individual  incomes  divergent  to 
the  greatest  possible  extent.  And  just  as  the  absolute  in- 
dividual incomes  are  thus  diverse,  so  also  are  extremely 
various  the  rates  of  the  specific  individual  incomes,  that 
is  to  say  the  quotients  respectively  obtained  by  dividing 
the  individual  incomes  by  one  or  by  the  totality  of  the  pro- 
ductive or  unproductive  elements  employed  to  produce  these 
incomes,  that  is  to  say,  by  capital,  land,  and  productive  or 

^  Statistik  der  preussischen  Einkommenssteuerveranlagung  fiir  1906,  p.  iv. 
*  Wagner,  Weitere  Unterstich.,  et<;.,  p.  233  ;   Jason,  loc.  cit.,  p.  56;  Chate- 
lain,  in  "  Questions  pratiques  de  legislation  ouvriere,"  July,  August,  1908. 


The  Distribtttion  of  Income  251 

unproductive  labour.  Undoubtedly,  if  the  individual  recipients 
of  income  were  in  free  competition  one  with  another,  the 
integral  rates  of  their  individual  incomes,  or  the  ratio 
between  these  incomes  and  the  total  capital  outlay  necessary 
to  obtain  them,  would  be  equal.  Since,  however,  the  in- 
dividual total  income  contains  in  most  cases  monopolist 
elements  (such  as  land-rent,  or  the  remuneration  for  various 
kinds  of  unproductive  labour),  it  results  that  the  rate  of  various 
individual  incomes  is  as  a  rule  different,  thus  contrasting 
with  the  rate  of  profit,  which  tends  normally  to  equality, 
since  the  rate  of  profit  has  reference  to  an  element  in  respect 
to  which,  speaking  generally,  the  fullest  competition  prevails. 

At  what  point  do  the  respective  individual  incomes  become 
established  ?  By  what  factors  is  their  amount  determined  ? 
We  pointed  out  in  Chapter  IV  that,  given  the  coercive  asso- 
ciation of  labour,  the  entity  of  the  respective  individual  in- 
comes, determined  at  the  outset  by  the  fertiHty  of  the  land 
owned  by  the  individual  recipients  of  income,  undergoes 
gradual  changes  owing  to  the  operation  of  a  series  of  influences 
which  were  then  discussed.  These  influences  may  be  classified 
under  two  clearly  distinct  heads.  In  the  first  place,  every 
individual  income  may  be  changed  by  all  the  causes  which 
change  the  quantity  of  the  total  income.  Hence  an  increase  in 
the  product  and  a  reduction  in  the  subsistences,  inasmuch  as 
these  changes  per  st  effect  an  increase  in  the  total  income, 
increase,  or  may  increase,  though  in  varying  degrees,  the 
respective  individual  incomes.  In  addition,  these  last  may 
be  affected  by  causes  which  leave  the  quantity  of  the  total 
income  unchanged  ;  for  it  may  happen  that  some  of  the 
incomes  increase  in  consequence  of  the  partial  or  total  annex- 
ation of  other  individual  incomes,  giving  rise  to  a  correlative 
reduction  in  the  incomes  thus  subjugated. 

Now  individual  income  tends  first  of  all  to  increase  in  virtue 
of  the  physiological  methods^  which  increase  the  total  income. 
These  methods,  however,  encounter  sooner  or  later  an  in- 

^  With  regard  to  the  use  of  the  term  "  physiological,"  it  is  desirable  to 
explain  that  the  author  classifies  under  two  heads  the  methods  of  increasing 
income.  The  first  of  these  is  by  increasing  the  product,  and  this  method  is 
good,  healthy,  and  physiological.  The  second  method  is  by  the  forcible  or 
fraudulent  annexation  of  the  income  of  others,  and  this  method  is  bad,  un- 
healthy, and  pathological. — Translator's  Note. 


252  The  Economic  Synthesis 

superable  obstacle,  for  the  reduction  of  subsistence  is  resisted 
by  the  productive  labourers,  whilst  the  increase  in  the  product 
is  peremptorily  hmited  by  the  restrictions  imposed  on  the 
productivity  of  associated  labour  by  the  coercion  which  dis- 
ciplines that  labour.  Sooner  or  later,  therefore,  the  moment 
arrives  in  which  individual  income  can  no  longer  be  increased 
by  methods  which  increase  the  total  income  ;  and  the  increase 
of  individual  income  can  then  be  effected  only  by  methods 
which  leave  the  total  income  unchanged,  that  is  to  say,  by 
the  more  or  less  forcible  annexation  of  other  individual  in- 
comes. In  this  way  individual  income,  restricted  by  the 
negative  influences  of  the  coercion  to  the  association  of  labour, 
is  forced  to  seek  expansion  jitr  fas  et  nefas  at  the  cost  of  rival 
incomes  ;  and  thus  from  the  initial  fact  of  the  coercion  im- 
plicit in  the  association  of  labour  there  results  as  an  inevitable 
corollary  the  struggle  between  incomes.  This  is  the  only 
form  of  human  struggle  which  can  be  compared  with  the 
animal  struggle  for  existence — whereas  the  struggle  between 
income  and  subsistence,  on  the  other  hand,  as  this  struggle 
is  displayed  in  the  case  of  differentiated  income,  is  parallelled 
by  many  and  various  phenomena  of  biological  parasitism. 

For  the  very  reason  that  the  struggle  between  incomes  is 
the  natural  outcome  of  that  coercive  association  of  labour 
which  is  the  inevitable  foundation  of  all  the  forms  of  income, 
this  struggle  makes  its  appearance  equally  in  the  case  of  un- 
differentiated, of  differentiated,  and  of  mixed  income  ;  with 
this  difference,  however,  that  in  the  case  of  undifferentiated 
income  the  restrictions  imposed  by  the  associative  authority 
moderate  the  intensity  of  the  struggle,  inasmuch  as  the  shght 
degree  of  quantitative  divergence  between  the  individual 
incomes  renders  comparatively  unlikely  the  victory  of  one 
income  over  another,  and  therefore  less  reasonable  and  less 
intense  the  struggle  between  the  incomes  ;  whereas  in  the 
case  of  differentiated  income,  in  which  coercion  by  the  collec- 
tivity is  non-existent,  and  in  which  the  difference  between 
the  incomes  is  conspicuous,  the  fight  between  incomes  is 
necessarily  fiercer  and  more  enduring. ^ 

1  "  Wherever  capitalism  penetrates,  there  the  struggle  for  existence  be- 
tween the  different  undertakings  begins."  Vandervelde,  Le  coUectivisme  et 
VevoltUion  industrieMe,  Paris,  1900,  p.  74. 


The  Distribution  of  Income  253 

The  struggle  is  carried  on  between  the  coexistent  incomes, 
whether  these  are  identical  or  are  different  in  the  matter  of 
their  technical  foundation,  their  form,  their  kind,  or  their 
degree.  In  the  first  place,  wherever  there  exists  an  income 
founded  upon  unassociated  labour,  income  founded  upon 
labour  coercively  associated  wages  war  against  it.  On  the 
other  hand,  we  have  seen  that  when  differentiated  income 
coexists  with  undifferentiated  income,  there  is  carried  on 
between  the  two  a  savage  warfare,  as  a  result  of  which  one 
or  the  other  form  attains  a  sovereign  predominance  ;  without, 
however,  always  driving  the  vanquished  form  from  the  field. 
Further,  within  a  single  given  form  of  income,  the  struggle  may 
be  carried  on  between  incomes  of  the  same  kinds  or  of  different 
kinds,  and  between  incomes  of  the  same  degree  or  of  different 
degrees.  The  various  kinds  and  the  various  degrees  of  income 
are  engaged  in  incessant  warfare  one  with  another,  and  this 
gives  rise  to  interesting  complications  which  will  subsequently 
be  discussed.  But  incomes  of  the  same  kind  or  of  the  same 
degree  may  also  struggle  one  with  another  as  soon  as  they 
present  a  sufficiently  conspicuous  quantitative  disparity  (and 
we  have  seen  that  individual  incomes  of  the  same  degree 
may  differ  quantitatively)  to  create  the  possibility  of  a  con- 
flict or  of  the  victory  of  one  over  the  other.  It  foUows  from 
this  that  the  struggle  between  incomes  is  not,  properly  speak- 
ing, a  class-struggle;  for  the  struggle  between  incomes  manifests 
itself  also  in  the  case  of  undifferentiated  income  wherein 
disparity  of  social  classes  is  unknown,  and  the  struggle  goes 
on  between  the  possessors  of  incomes  equal  in  kind  or  equal 
in  degree,  that  is  to  say  (if  the  society  be  one  in  which  class- 
distinctions  exist)  between  those  who  belong  to  the  same 
social  class  or  sub-class.^  In  general  terms,  this  struggle  is  a 
universal  phenomenon,  the  outcome  of  the  simple  fact  of  the 
coexistence  of  a  number  of  individual  incomes,  however 
little  these  incomes  may  differ. 

The  struggle  between  incomes,  arising  on  the  silent  plat- 
form of  economic  conflicts,  frequently  degenerates  into  a 
political  struggle.  Even  when  confined  to  the  purely  economic 
plane,  there  is  always  some  political  admixture,  inasmuch  as 

*  Halperine,  Des  luttes  socialea,  "  Annales  de  I'inst.  int.  de  sociologie," 
1907,  pp.  252,  254. 


254  The  Economic  Synthesis 

the  individual  incomes  make  use  of  the  arm  of  authority  in 
order  to  weaken  their  rivals »  Limiting  ourselves  here  to  the 
consideration  of  the  struggle  between  incomes  in  its  strictly 
economic  manifestations,  it  may  be  pointed  out  that  this 
struggle  manifests  itself  in  two  ways  that  are  substantially 
diverse.  It  may  happen  that  an  income,  in  the  struggle  against 
its  rivals,  favours  the  natural  influences  which  privilege  it, 
with  the  ultimate  aim  of  increasing  its  own  superiority  to 
their  disadvantage.  This  is  what  happens,  for  example,  when 
landowners  annex  new  uncultivated  areas  of  land,  or  when 
they  oppose  the  introduction  of  agricultural  improvements,  or 
when  they  insist  upon  short-term  leases,  in  order  to  increase  rent 
at  the  expense  of  profit  ;  or  when  capital  favours  by  premiums 
or  in  some  other  way  the  importation  of  foreign  wheat  at  a 
low  price,  or  facihtates  the  transfer  of  land,  or  the  loan  of 
money  to  tenant  farmers  at  low  rates  of  interest ;  or  when 
the  larger  incomes  sohcit  loans  at  low  rates  of  interest  for  the 
larger  industrial  undertakings,  or  form  combines  to  purchase 
raw  materials  or  machines  at  reduced  prices.  But  it  may  happen 
also  that  income  is  not  content  with  favouring  the  natural  con- 
ditions of  its  own  pre-eminence,  but  that  by  artificial  and 
arbitrary  means  it  secures  a  pre-eminence  which  it  would  not 
naturally  possess.  This  happens,  for  example,  when  certain 
vendors  combine  to  force  buyers  to  pay  abnormal  prices  for 
their  commodities,  or  when  certain  producers,  less  able,  or 
less  favoured  by  nature,  obtain  by  means  of  protective  duties 
or  by  bounties  the  monopoly  of  a  national  or  a  foreign 
market,  or  procure  by  some  underhand  manoeuvre  the  monopoly 
of  certain  supplies  needed  by  the  state,  or  secure  preferential 
tariffs  from  the  railway  companies.  It  will  be  understood 
that  in  this  latter  case  the  struggle  between  the  incomes  will 
be  fiercer  or  will  assume  more  complex  forms. 

Finally,  we  may  in  the  abstract  distinguish  the  struggle 
between  incomes,  according  as  that  struggle  is  confined  to  pre- 
venting the  decrease  of  individual  income,  or  aims  at  effecting 
an  actual  increase.  In  practice,  however,  the  distinction  is 
inept  ;  for  the  struggle,  even  if  it  has  been  begun  with  the 
intent  of  preventing  the  decline  of  individual  income,  ends 
always  by  aiming  at  the  increase  of  that  income. 

Putting  such  distinctions  on  one  side,  and  considering  the 


The  Distribtition  of  Income  255 

struggle  between  incomes  in  its  most  varied  manifestations,  it 
may  be  said  that  this  struggle  is  practised  according  to  three 
methods  which  are  very  different  in  character,  although  they 
may  be  associated  ;   violence,  fraud,  and  monopoly. 

(a)  Violence. — ^The  first  of  these  methods  is  seen  in  operation 
whenever  one  income  forcibly  attacks  a  rival  income,  in  order 
to  annex  the  latter,  wholly  or  in  part.  Such  a  method  of 
struggle  is  seen  even  in  the  case  of  undifferentiated  income, 
and  it  will  be  easy  to  give  examples  of  this.  Thus,  in  Russia, 
up  till  a  few  years  ago,  struggles  frequently  occur  between 
the  more  well-to-do  and  the  less  well-to-do  members  of  the 
rural  communities  ;  the  latter  strive  to  bring  about  a  redis- 
tribution of  the  common  lands,  whilst  the  former,  who  are 
in  possession  of  larger  lots,  resist  by  all  the  means  in  their 
power.  Sometimes  the  contest  is  fought  out  by  the  bloodless 
method  of  wranghng,  or  by  legal  finesse ;  but  not  infrequently 
more  serious  trouble  ensues,  such  as  the  refusal  of  some  of  the 
communists  who  have  been  deprived  of  their  lands  to  pay 
dues  to  the  commune  any  longer,  or  there  may  be  armed  com- 
bats, which  are  hardly  allayed  by  the  intervention  of  the 
priests,  cross  in  hand.^  Analogous  phenomena  are  seen  in 
Bavaria  in  1793-4,  in  1803-4,  and  subsequently :  either  because 
the  larger  owners  oppose  the  equal  distribution  of  the  com- 
munal wealth  ;  or  else  because,  the  distribution  of  the  land 
having  been  effected,  they  insist  that  all  common  rights 
to  the  communal  pastures  shall  come  to  an  end ;  or  because, 
on  the  other  hand,  after  having  withdrawn  from  the  com- 
munity, they  claim  the  right  to  pasture  their  own  cattle  upon 
the  common  land.^  It  will,  however,  readily  be  understood 
that  violence  is  practised  with  much  greater  frequency  and 
intensity  in  the  case  of  differentiated  income.  We  find  that 
Aristotle  postulates  theft  as  one  of  the  natural  means  of 
acquiring  property, ^  and  primitive  Roman  law  likewise 
regards  theft  as  a  matter  of  civil  not  of  criminal  law  ;  nor 
indeed  can  it  be  maintained  that  either  the  Greeks  or  the 
Romans  showed  much  moderation  in  their  attempts  to  profit 

1  [Miscellany  of  Economic  Researches  upon  Rtissia]  Moscow,  1892, 1,  pp.  49, 
52,  etc. 

*  Wiesmiiller,  Geschichte  der  Theilung  der  Gemeindeldndereien  in  Bayern^ 
Stuttgart,  1904,  pp.  41,  59-60 ;   71-2,  etc. 

3  Ethics,  Book  V,  Chap  II, 


256  The  Economic  Sy7tthesis 

by  this  juristic  indulgence.  But  the  violent  struggle  between 
incomes  exhibits  its  extremest  scope  and  intensity  in  the 
case  of  the  feudal  income,  in  which  the  barons  endeavour  to 
round  off  their  own  incomes  by  means  of  a  series  of  systemati- 
cally organised  extortions,  it  may  be  from  rival  barons,  it 
may  be  from  the  traders  and  the  burghers  of  the  cities.  Well 
known  are  the  records  of  those  escutcheoned  robbers  to  whom 
Rabelais  gives  the  name  of  genpilshommes  or  gentuehommes, 
who  sally  forth  from  their  castellated  fortresses  to  commit 
the  most  barbarous  acts  of  plunder.  And  such  practices  must 
be  lucrative  when,  in  the  Auvergne,  Aimergot  obtains  thereby 
an  income  of  20,000  florins.  Nor  is  this  all,  for  when  the  barons 
have  terrorised  the  country-side,  they  put  the  whole  area 
in  pactis,  levying  an  arbitrary  tax  upon  all  the  burghers  and 
all  the  labourers.  Others  adopt  a  no  less  lucrative  profession, 
regarded  as  thoroughly  legitimate,  namely  that  of  wreckers 
to  obtain  booty.  Finally,  the  unending  wars  between  feudal 
lords  and  cities,  between  nobles  and  clergy,  between  one 
vassal  and  another,  which  fill  this  disturbed  period  with 
clamour  and  with  blood,  are  no  more  than  so  many  manifesta- 
tions of  the  violent  struggle  between  incomes  which  during  this 
epoch  exhibits  its  crudest  and  most  noteworthy  developments.^ 
Even  in  the  most  advanced  and  most  modern  form  of 
differentiated  income,  the  struggle  between  incomes  some- 
times develops  with  armed  violence.  Private  individuals  do 
not  disdain  to  have  recourse  to  force  in  order  to  increase  their 
own  income  at  others'  expense  ;  witness  the  armed  struggles 
between  shepherds  and  cultivators  in  Sardinia,  or  the  filibuster- 
ing expedition  of  Rockefeller  against  the  pipe-line  in  course  of 
construction  for  the  United  States  Pipes-Lines  Company. 
Besides,  what  is  war  but  a  method  which  aims  at  enlarging  the 

^  Bonnemere,  Hiatoire  de  la  Jacquerie,  Paris,  1871,  p.  48  ;  Inama-Stemegg, 
Deutsche  Wirtschaftsgeschichte,  Vol.  II,  Leipzig,  1891,  pp.  169-70  ;  Lamprecht, 
Deutsche  Oeschichte,  2nd  edition,  Berlin,  1894,  et  seq.,  V,  I,  79,  et  seq.  ;  Nitzch, 
Qeschichte  des  deutschen  Volkes,  Leipzig.  1883,  et  seq..  Vol.  I,  p.  170,  Vol.  II, 
pp.  8,  et  seq.  In  France  private  wars  are  checked  by  Louis  IX  and  Philippe 
IV,  and  are  suppressed  by  Charles  VI  ;  in  England  they  become  compara- 
tively rare  after  the  Norman  Conquest  (Westermarck,  Origin  and  Development 
of  Moral  Ideas,  London,  1906,  I,  p.  357).  But  the  lessening  of  the  struggle 
between  incomes,  even  when  apparently  due  to  the  influence  of  the  sovereign 
power,  is  really  the  outcome  of  the  reduction  in  the  number  of  the  recipients 
of  income  and  in  the  total  quantity  of  income,  which  is  the  natural  fruit  of 
this  contest,  and  gradually  deprives  it  of  aliment. 


The  Distribution  of  Income  257 

incomes  of  the  members  of  one  nation  at  the  cost  of  the  members 
of  another  ?  As  a  rule,  indeed,  in  modern  times,  violence, 
instead  of  having  recourse  to  arms,  is  exercised  by  the  inter- 
mediation of  the  law ;  for  the  recipients  of  the  larger  incomes 
take  advantage  of  the  pre-eminence  this  gives  them  to  obtain 
the  passage  of  laws  which  emich  them  at  the  expense  of  rival 
incomes.  Thus  in  England,  from  1650  to  1750,  the  landowners, 
suffering  from  the  depreciation  of  wheat  and  from  the  high 
rate  of  interest,  struggle  to  secure  laws  which  will  lower  this 
rate  ;  whilst  the  capitalists,  supported  by  the  economists, 
make  head  against  the  agitation.  On  the  other  hand,  during 
the  years  subsequent  to  1760,  the  capitalists,  injuriously 
affected  by  the  high  price  of  wheat  and  by  the  rise  of  land- 
rent,  insist  on  the  passage  of  laws  aiming  to  lower  rent.^  To- 
day, again,  in  the  United  States,  with  every  advance  in  popu- 
lation, and  with  every  correlative  remove  of  the  "  frontier," 
the  indebted  cultivators,  who  find  their  undertakings  com- 
promised by  the  unexpected  depreciation  of  wheat  which 
results  from  the  cultivation  of  virgin  soil,  endeavour,  in  order 
to  save  themselves,  to  obtain  the  passage  of  laws  that  will 
cause  a  depreciation  in  the  value  of  money  ;  hence  there 
results  a  struggle  between  debtor-incomes  and  creditor- 
incomes  fought  out  by  the  method  of  legal  violence. ^  Finalty, 
whenever  manufacturers  procure  iUicit  advantages  by  means 
of  protective  duties  or  of  governmental  concessions,  we  have 
in  fact  a  form  sui  generis  of  the  struggle  between  incomes  on 
the  basis  of  violence,  or  upon  that  of  violence  in  combination 
with  monopoly.^ 

(h)  Fraud. — ^The  second  of  the  methods  under  consideration, 
fraud,  may  also  manifest  itself  in  the  case  of  undifferentiated 
income ;  and  we  have  examples  of  this  in  the  craft-guilds, 
which  not  infrequently  endeavour  to  enrich  themselves  by 
fraudulent  means  at  the  expense  of  rival  guilds  or  of  rival 
incomes.  But  this  method  is  seen  in  particular  intensity  in 
the  case  of  differentiated  income,  and  above  all  in  the  case  of 
the  slave  economy,  in  which  fraud  appears  as  the  systematic 

*  Marx,  Mehrwerththeorien,  I,  pp.  18,  et  seq. 

*  Consult  on  this  matter  the  exceptionally  interesting  work  of  Wildman, 
Money  Inflation  in  the  United  States,  New  York,  1905,  pp.  205,  et  passim. 

^  "  The  upper  class  is  essentially  a  predatory  class,"  Veblen,  Theory  of  the 
Leisure  Class,  New  York,  1899,  pp.  233,  241,  et  seq. 


258       •         The  Economic  Synthesis 

means  of  enrichment. ^  As  to  this  matter  it  is  worth  noting 
that  whilst  it  is  often  maintained  that  the  wealthy  class 
proceeds  from  methods  of  violent  robbery  to  methods  of  fraud, 
or,  in  more  general  terms,  the  development  of  criminahty  by 
force  into  criminaUty  by  guile  is  raised  to  the  dignity  of  a 
universal  law,  the  struggle  between  incomes  presents,  in  this 
regard,  the  opposite  transition  ;  for  in  the  slave-economy 
the  dominant  method  of  struggle  between  incomes  is  fraud, 
whereas  in  the  subsequent  serf -economy  it  is  violence.  The 
reason  development  takes  this  course,  which  at  first  sight 
seems  surprising,  is  simply  this,  that  in  the  slave-economy 
income,  not  being  in  possession  of  political  sovereignty, 
cannot  fight  with  arms  in  hand  against  rival  incomes,  and 
must  therefore  have  recourse  to  the  more  tortuous  and  less 
efficacious  method  of  trickery  ;  whilst  in  the  serf-economy, 
income,  wielding  power,  can  therefore  wield  the  speedier  and 
more  efficient  arm  of  material  violence. ^ 

This,  however,  does  not  exclude  the  possibility  that  fraud 
may  function  as  a  method  of  struggle  between  incomes  in 
other  forms  also  of  differentiated  income.  Thus,  in  the  Middle 
Ages,  interest,  baffled  by  the  laws  against  usury,  reacts  by  the 
subtle  craft  of  the  lucrum  cessans  and  the  contractum  trinum  ; 
whilst  to-day  the  entrepreneur's  reward,  combated  by  law 
and  pubhc  opinion,  since  in  law  and  public  opinion  income 
appertains  almost  exclusively  to  ownership,  reacts  by  means 
of  the  artifice  of  watered  capital.  To-day,  in  fact,  joint- 
stock  companies  issue  preference  shares,  or  in  many  cases 
debentures,  representing  the  value  of  the  capital  really  in- 
vested (though  sometimes  as  much  as  three  times  this  amount), 
and  ordinary  shares,  or  shares  properly  so-called — ^for  an  amount 
which  sometimes  is  as  much  as  double  that  of  the  prefer- 
ence shares  or  of  the  debentures — ^the  ordinary  shares  re- 
presenting the  capitaHsation  of  the  good-will,  the  privileges 

1  It  suffices  to  call  to  mind  the  expressions  "  Greek  faith,"  "  Punic  faith," 
etc.  Even  the  Romans,  who  built  a  temple  to  Good  Faith,  do  not  appear,  in 
this  respect,  to  have  been  much  better  than  their  enemies  ;  and,  in  this 
connexion,  it  is  suggestive  to  note  the  frequent  references  made  by  the 
Roman  jurists  to  the  position  of  the  malae  fidei  possessor,  in  contrast  with  the 
comparative  rarity  of  allusions  to  the  matter  in  modem  law. 

2  These  considerations  are  developed  in  detail  in  the  author's  Economic 
Foundations  of  Society  (Enghsh  Translation,  London,  1910,  Part  III,  Chap.  I, 
.'  Economic  Revenue  and  Political  Sovereignty  " — especially  pp.  137,  et  seq.). 


The  Distribution  of  Income  259 

enjoyed  by  the  enterprise,  the  advantage  due  to  exemptions, 
trade-marks,  patents,  etc.  Now  the  capital  represented  by 
the  ordinary  shares  (when  preference  shares  are  issued),  or  by 
the  shares  (when  debentures  are  issued),  is  simply  water,  that 
is  to  say,  it  is  merely  fictitious  and  supposititious  wealth, 
serving  solely  to  secure  a  conspicuous  share  of  income  as  the 
entrepreneur's  reward,  at  the  expense  of  capital.^ 

No  detailed  reference  need  be  made  here  to  the  incessant 
legal  interference  with  production  during  the  Middle  Ages, 
which  displays  the  lack  of  industrial  honesty  ;  nor  to  the 
gigantic  frauds  of  the  English  bankers  and  jewellers  in  the 
seventeenth  century,  by  which  they  enrich  themselves  to  a 
fabulous  extent  ^ ;  nor  need  we  make  more  than  passing 
mention  of  the  fact  that  during  the  eighteenth  century  frauds 
are  customary  among  the  manufacturers  of  Birmingham 
and  of  all  the  great  cities  of  England,^  and  of  the  way  in 
which  these  frauds  increase  in  extent  as  the  merchant  princes 
are  replaced  by  traders  working  with  borrowed  capital* ; 
nor  need  we  now  give  a  detailed  description  of  the  unclean 
atmosphere  of  the  modern  stock  exchange,  whose  transactions 
are  all  founded  on  fraud  ^  ;  it  suffices  to  ask  ourselves  what 
does  the  history  of  the  Standard  Oil  Trust  amount  to,  but  to 
a  tissue  of  deviHsh  frauds,  carried  out  with  inexorable  cruelty, 
upon  rival  refiners  or  upon  the  producers  of  crude  petroleum  ? 
Promises  and  solemn  oaths,  pledged  with  tears  in  the  eyes, 
and  thereafter  unscrupulously  repudiated  ;  gross  bribery  of 
rival  producers  and  traders  to  induce  them  to  betray  their  own 
associates ;  the  vexatious  obstruction  of  and  the  bringing  of 
malignant  actions-at-law  against  rival  undertakings  ;  the 
election  by  the  Trust  of  its  own  henchmen,  by  illegal  and 
equivocal  means,  to  the  direction  of  rival  enterprises  ;  the 
systematic  organisation  of  espionage  upon  the  managers  of 

^  Veblen,  Theory  of  Business  Enterprise,  New  York,  1904,  pp.  147-8 ; 
Lawson,  Frenzied  Finance,  London,  1906,  pp.  374-5. 

2  Tooke,  History  of  Prices,  London,  1838,  Vol.  I.,  p.  33.  Many  examples 
are  given  by  Evans,  Facts,  Failures,  and  Frauds  ;  Revelations^  Financial, 
Mercantile,  and  Criminal,  London,  1859. 

2  Mantoux,  loc.  cit.,  p.  394. 

•  Bagehot,  Lombard  Street,  Paris,  1874,  p.  10. 

^  1907. — Action  against  the  board  of  directors  of  the  Savoj a- Palmer 
Company,  who  have  issued  shares  of  25  lire  nominal  value  at  80  lire^  thus 
secxiring  for  themselves  a  premium  of  55  lire. 


26o  The  Economic  Synthesis 

these  ;  the  soliciting  and  bribing  of  the  customers  of  their 
rivals  to  induce  these  customers  to  repudiate  orders  already 
given  to  the  rival  firms  ;  the  dissemination  of  false  reports  as 
to  the  insolvency  of  rival  undertakings  to  induce  their  customers 
to  leave  them  ;  the  bribery  of  directors  of  rival  firms  to  induce 
them  to  resign  ;  the  bribery  of  judges  who  are  to  try  actions 
brought  against  the  Standard  Oil  Trust — such  are  some  of 
the  most  salient  among  the  frauds  deliberately  organised 
by  this  criminal  federation,  recorded  in  unimpeachable  docu- 
ments in  letters  of  fire  and  blood. ^ 

The  fact  remains,  however,  that  the  two  methods  of  struggle 
hitherto  examined,  ^  although  encountered  to  some  extent  in 
all  the  forms  of  income,  attain  to  the  position  of  fundamental 
social  institutions  only  in  that  form  of  differentiated  income 
which  is  founded  on  the  ownership  of  man.  Now  the  funda- 
mental part  which,  in  these  forms  of  income,  is  played  by 
violent  or  fraudulent  methods  of  gain,  destroys  the  possibifity 
of  fiduciary  credit  by  cancelling  the  conditions  which  alone 
can  originate  and  foster  it.  It  is  for  this  reason  that,  where 
income  is  based  upon  the  ownership  of  man — ^while  usury 
exists  (usury  which  is  the  negation  of  confidence),  and  also 
credit  upon  a  personal  basis  (nexus),  and  in  addition  real  or 
hypothecary  credit  which  is  independent  of  personal  confi- 
dence— ^we  look  in  vain  for  fiduciary  credit,  or  for  the  system  of 
institutions  founded  on  confidence  ;  in  other  words,  as  Ferrara 
well  expresses  the  matter,  "  we  find  acts  of  credit,  but  not 
institutions  of  credit. "^ 

Even  in  Greece  and  in  Rome  it  was  not  regarded  as  safe  to 
lend  money  at  interest.  In  an  edict  of  Constantine  (twenty- 
second  law.  Cod,  Be  adm.,  §  5  a)  we  read  :  "  huic  accedit,  quod 
ipsius  pecuniae,  in  qua  robur  omne  patrimoniorum  veteres 
posuerunt,  fenerandi  usus  vix  diuturnus,  vix  continuus  et 
stabilis  est  ;  quo  facto,  saepe  intercidente  pecunia,  ad  nihilum 
minorum  patrimonia  deducuntur."*  This  is  why  restrictions 
of  all  kinds  are  imposed,  lest  guardians  should  employ  the 

1  Consvilt  the  conscientious  and  profound  work  of  Ida  Tarbell,  History  of 
the  Standard  Oil  Company,  London,  1905. 

2  The  two  methods  of  violence  and  fraud  may  be  associated.  For  example, 
it  is  whispered  that  many  mishaps  and  fires  in  the  case  of  ships  not  yet 
launched  are  the  work  of  rival  shipping  firms. 

3  Bibl.  dell'  Ec,  Series  II,  Introduction  to  Vol.  VI,  p.  135. 

*  Pemice,  Zeitachrift  der Savigny-Stiftung fur  Rechtagesch . ,  1 898,  pp.  1 00,  e<  aeq. 


The  Distribution  of  Income  261 

property  of  their  wards  in  loans ;  and  for  this  reason  the  rrwihie 
fidei  possessor  of  an  inheritance  is  absolved  from  the  burden  of 
the  payment  of  interest  for  the  sums  of  money  of  which  it 
is  made  up,  and  the  same  even  appHes  to  the  partner  who 
lends  at  his  own  risk  a  part  of  the  capital  held  in  partnership ; 
for  the  interest  of  capital  is  regarded  as  an  income  of  an 
altogether  exceptional  character,  or  as  remuneration  for  the 
risk  incurred  in  making  the  loan,  and  it  is  therefore  considered 
to  belong  to  the  lender  even  when  the  capital  he  lends  belongs 
to  another.  1  The  custom  of  hoarding,  then  so  widely  diffused, 
shows  how  rare  were  the  opportunities  for  effecting  safe  loans  ; 
wliilst  the  institution  of  the  tresviri  mensarii^  who  lend  state 
money  to  private  debtors,  shows  that  private  capital  is  not 
available  for  loans  in  sufficient  quantity.  The  abnormal 
rate  of  interest,  which  the  law  26  de  Usuris  specifies  at  4%  in 
the  case  of  persons  of  distinction,  8%  in  the  case  of  merchants, 
6%  in  the  case  of  ordinary  persons,  but  12%  in  the  case  of 
dealers  in  wheat  and  oats,  whilst  in  actual  fact  in  Rome  it 
was  always  somewhere  near  the  highest  of  these  figures, 
shows  very  clearly  how  small  is  the  reliance  placed  on  the 
honesty  and  punctuahty  of  the  debtor. — ^It  is  worse  still 
during  the  Middle  Ages ;  for  during  this  period  the  rate  of  interest 
rises  to  20  and  even  35%,  2  and  there  prevails  the  system 
of  the  vif-gage,  in  accordance  with  which  the  ownership  of 
mortgaged  land  is  assigned  to  the  creditor,  and  the  most 
varied  operations  of  credit  assume  the  character  of  acts  of 
buying  and  selling  ^  ;  all  this  results  from  and  gives  additional 
evidence  of  the  complete  absence  of  mutual  confidence.  On 
the  other  hand,  it  is  perfectly  true  that  in  Greece  the  temples, 
the  first  bankers  of  antiquity,  receive  money  on  deposit,  that 
in  Rome  there  exist  bourses  (basilicae),  and  the  argentarii 
receive  deposits  inscribed  upon  their  codices  or  tabulae,  issue 
drafts  payable  by  their  foreign  correspondents,  cheques  and 
letters  of  credit  ;  and  that  in  the  Middle  Ages  we  have 
bills  of  exchange  and  public  securities  (luoghi  di  monte). 
But  in  Rome*  one  who  sells  on  credit  has  no  legal  right  to 

^  Petrazycki,  loc.  cit,  II,  pp.  182,  et  seq.y  204. 

*  Cibrario,  Economia  politica  del  Medio  Evo,  Turin,  1854,  p.  356. 
"  Biicher,  Entstehung  der  Volkswirtach.,  pp.  60,  61-3. 

*  Goldschmidt,  Univeraalgeachichte  dee  Handelsrechts,  1890,  pp.  62,  ei  eeq. 


262  The  Economic  Synthesis 

sue  for  the  recovery  of  the  debt :  nor  is  the  transmission  of 
credits  admissible  except  to  heirs ;  or,  in  order  to  effect  such 
transmission,  recourse  is  had  to  the  roundabout  method  of 
delegatio  nominis,  which  extinguishes  the  original  credit  in 
order  to  create  a  new  one,  the  consent  of  the  debtor  having 
been  obtained,  depriving  the  grantee  of  the  advantages  that 
may  be  inherent  in  the  original  credit.  Above  all,  in  antiquity, 
fiduciary  credit,  which  would  be  all  the  more  desirable  in 
view  of  the  rarity  of  the  precious  metals,  is  altogether  un- 
known.^ Even  if  the  Greek  rpaire^iroL  issue  notes  payable 
on  demand,  it  is  certain  that  the  Roman  bankers  know  nothing 
of  the  discounting  of  bills  of  exchange  or  of  notes  payable  on 
demand  ;  they  are  altogether  ignorant  of  the  mechanism  of 
fiduciary  circulation ;  and  in  most  cases  they  are  unable  to 
make  any  use  of  the  money  deposited  in  their  hands,  and 
therefore  pay  no  interest  upon  it.  Need  we  say  more  ?  Even 
in  the  United  States,  not^vithstanding  its  advanced  economic 
development,  credit  institutions  are  not  established  upon  a 
sohd  foundation  as  long  as  the  slave-holding  system  con- 
tinues. ^ 

This  is  manifested  by  yet  more  precise  evidence  in  the 
organisation  of  the  banks  of  the  Middle  Ages,  which  may 
receive  money  on  deposit,  but  cannot  lend  it  out  again. 
Montesquieu  expresses  this  in  the  categorical  statement  that 
the  banks  are  institutions  for  the  exchange  of  money  but  not 
for  its  loan.^  Indeed,  the  Venetian  laws  of  September  28th, 
1374,  and  November  21st,  1403,  visit  with  severe  punishments 
bankers  who  relend  deposits  ;  again,  the  law  condemns  the 
use  of  deposits  as  irregular  ;  once  more,  the  Contarini  visit 
the  practice  with  heavy  penalties.*  When  the  Bank  of  Rialto 
is  founded  in  1587,  the  council  of  direction  undertakes  never 
to  lend  out  deposited  money  ;  and  when,  somewhat  later,  in 
the  year  1619,  the  Banco-Giro  is  founded,  it  is  forbidden  to 
lend  money  to  merchants  ;    and  we  find  an  analogous  pro- 

^  We  even  hear  of  notes  issued  by  the  Babylonian  banking  house  Egibi, 
of  bank-notes  issued  among  the  Chaldeans  in  2300  B.C.,  and  of  yet  others 
issued  in  China  in  the  most  remote  antiquity  ;  whilst  it  seems  that  the  Greek 
temples  could  relend  the  money  deposited  with  them.  But  here  we  are  in 
any  case  concerned  with  sporadic  and  altogether  exceptional  phenomena. 

'  Loria,  Analisi,  II,  pp.  340,  et  eeq. 

'  Esprit  dee  lois,  XXII,  p.  16. 

*  Lattes,  La  libertd  delle  banche  a  Venezia,  Milan,  1869,  p.  125. 


The  Distribution  of  Income  263 

hibition  imposed  upon  the  Bank  of  Amsterdam,^  and  upon 
all  the  banks  of  the  Middle  Ages.^  The  giro  delle  partite  of 
Venice,  the  biglietto  di  cartulario  of  Genoa,  the  polizza  di  tavola 
of  Palermo,  the  florin-banco  of  Amsterdam,  the  sous  de  Tours 
in  France,  the  devo  in  Sicily,  the  token  in  England,  are  none  of 
them  anything  more  than  warrants  of  the  deposit  of  treasure 
or  bullion  which  is  not  considered  available  for  use  by  the 
banker. 3  Assuredly  the  prohibition  is  very  often  disregarded  ; 
and  it  not  infrequently  happens  that  the  private  and  pubhc 
banks  lend  the  moneys  deposited  with  them,  in  some  cases 
to  the  State  (as  at  Genoa  and  Venice),  in  some  cases  to  mer- 
cantile companies,  and  in  some  cases  to  private  traders.  But 
the  invariable  failure  of  all  the  banks  which  undertake  to 
relend  deposits,  and  the  ever-recurring  necessity  of  legal 
intervention  to  re-estabHsh  the  inviolabiHty  of  these  deposits, 
afford  the  clearest  possible  demonstration  that  during  this 
epoch  institutions  of  credit  properly  so-called  are  impossible, 
owing  to  the  absence  of  that  confidence  which  is  the  essential 
element  of  credit.  Indirect  demonstrations  of  the  same 
fact  are  the  banking  follies  of  Law,  which  would  have  been 
impossible  in  the  case  of  a  public  already  experienced  in 
the  working  of  fiduciary  credit  institutions*;  and  the  angry 
astonishment  with  which  writers  at  the  beginning  of  the 
nineteenth  century,  such  as  Lord  Liverpool  and  Cobbett 
denounce  and  condemn  the  foundation  of  banks  issuing 
notes. ^ 

(c)  Monopoly. — ^The  most  important  method  of  struggle 
between  incomes,  and  that  which  presents  the  most  interesting 
developments,  is  monopoly.  Indeed,  except  by  fraud  or 
violence,  an  individual  cannot  rationally  undertake  a  contest 
against  another  unless  he  possesses  some  sort  of  advantage 
from  which  the  other  is  excluded — unless,  in  other  words, 
he  possesses  a  monopoly.  This  amounts  to  saying  that  if 
violence  and  fraud  are  ehminated,  monopoly  is  the  only 
possible  means  of  struggle  between  incomes. 

^  Graziani,  Instituzioni  di  E.  P.,  2nd  edition,  p.  627. 

*  De  Viti,  Lafunzione  delta  banca,  Rome,  1897. 
'  Ferrara,  Nuova  Antologia,  1873,  p.  626. 

*  Levasseur,  Recherches  historiques  sur  le  systeme  de  Law,  Paris,  1854,  p.  29. 
^  Liverpool,  Treatise  on  the  Coins  of  the  Realm  [1805],  London,  1880,  p.  248  ; 

Cobbett,  History  of  the  Protestant  Reformation,  London,  1829,  §412-3. 


264  Tke  Economic  Synthesis 

The  monopoly  may  be  industrial,  as  when  a  producer 
has  at  his  disposal  technical  and  economic  means  superior 
to  those  at  the  disposal  of  other  producers  of  the  same  com- 
modity or  group  of  commodities  ;  commercial,  as  when  an 
individual  or  group  of  individuals,  is  exclusively  empowered 
to  sell  or  to  buy  a  given  commodity  or  group  of  commodities  ; 
credital,  as  when  an  individual  is  exclusively  empowered  to 
furnish  capital  to  certain  persons  or  to  certain  social  groups. 
The  forms  to  which  these  three  kinds  of  monopoly  give  rise 
deserve  closer  attention. 

1.  Industrial  Monopoly. — ^Industrial  monopoly  is  complete 
when  a  producer  has  the  exclusive  right  to  undertake  a 
given  kind  of  production.  In  such  conditions,  however, 
monopoly,  far  from  being  a  method  of  struggle  between  pro- 
ducers, renders  impossible  any  struggle  between  the  incomes 
appertaining  to  a  single  kind  of  production,  inasmuch  as  it 
excludes  the  existence  of  a  plurality  of  producers  in  the  par- 
ticular sphere  of  industry.  In  such  conditions,  monopoly 
may  certainly  give  rise  to  a  struggle  between  the  producers 
of  different  commodities ;  but  it  more  commonly  resolves  itself 
into  a  method  of  struggle  between  the  income  of  producers 
and  the  income  of  consumers  ;  and  thus  enters  the  category 
of  the  commerical  monopolies  subsequently  to  be  considered. 
— Industrial  monopoly  may,  however,  be  partial;  and  this 
happens  when  a  producer  is  the  exclusive  owner  of  some 
element,  or  of  some  particularly  efficient  instrument,  which 
enables  him  to  sell  the  product  at  a  price  lower  than  that 
which  will  repay  the  cost  of  production  incurred  by  other 
producers  of  the  same  commodity,  or  of  substituted  or  similar 
commodities,  and  thus  enables  the  producer  possessing  the 
partial  monopoly  to  threaten  the  existence  of  the  others.^  In 
such  conditions  there  exists  industrial  monopoly  properly 
so-called,  functioning  as  the  instrument  of  struggle  between 
the  incomes  of  coexistent  producers.  This  does  not  exclude 
the  possibility  that  the  struggle  between  industrial  incomes 
may  eventuate  in  the  destruction  of  all  the  less  favoured 
producers,  and  in  the  survival  of  the  single  producer  who 
enjoys  the  monopoly  :  but  this  will  transform  the  industrial 
monopoly  into  a  commercial  monopoly. 

1  Tarde,  Psychologic  economique,  Paris,  1902,  II,  pp.  59,  el  aeq. 


The  Distributio7t  of  Income  265 

It  is  necessary  to  point  out  that  industrial  monopoly  could 
not  function  as  an  instrument  of  struggle  between  incomes 
if  it  were  to  manifest  itself  with  equal  intensity  in  all  spheres 
of  production.  If,  in  fact,  in  all  the  kinds  of  production 
there  should  coexist,  in  like  proportion,  certain  more  favoured 
and  other  less  favoured  producers,  the  employment  by  the 
former  of  superior  methods  would  not  have  any  influence 
in  lowering  the  price  of  the  products  ;  for  it  is  well  known 
that  phenomena  which  act  in  equal  measure  upon  the 
production  of  all  commodities  can  exercise  no  influence 
whatever  upon  the  price  of  these.  Therefore,  in  such  con- 
ditions, there  could  not  occur  that  process  in  virtue  of  which 
the  monopoly  of  certain  producers  becomes  injurious  to  the 
income  of  the  rest ;  that  is  to  say,  monopoly,  though  always 
the  source  of  an  additional  income  to  its  possessors,  would 
no  longer  be  an  efficacious  weapon  in  the  struggle  between 
incomes.  In  reahty,  however,  industrial  monopoly  does  not 
manifest  itself  simultaneously  in  all  fields  of  production ; 
or,  even  if  it  does  so  manifest  itself,  it  is  to  a  different  degree 
in  one  field  and  in  another  ;  hence  it  can  exercise  an  effective 
influence  in  depressing  the  price  of  the  product  below  that 
which  will  repay  the  cost  of  production  incurred  by  less 
favoured  producers,  the  income  of  these  latter  being  thus 
diminished  or  annulled  to  the  direct  or  indirect  advantage 
of  the  more  favoured  producers.  Doubtless  the  less  favoured 
producers  can  partially  escape  injury,  either  by  purchasing 
the  depreciated  products  to  re-elaborate  them  or  to  export 
them  at  a  profit, ^  or  else  by  withdrawing  from  the  depreciated 
field  of  production  to  transfer  themselves  to  other  fields  in 
which  industrial  monopoly  is  less  severe  or  is  non-existent ; 
but,  in  the  first  place,  while  such  a  process  may  well  be  open 
to  the  more  advantageously  situated  producers,  it  can  hardly 
be  so  to  those  who  are  less  well-to-do,  who  by  the  very  scanti- 
ness of  their  fortunes  are  shackled  to  the  kinds  of  production  no 
longer  remunerative  ;  and,  in  the  second  place,  the  transference 
from  one  enterprise  to  another  involves  a  loss  of  property  and 
income  which  is  often  profitable  to  the  victorious  competitors. 
If  industrial  monopoly  is  to  function  as  a  method  of  struggle 
between  incomes,  another  essential  condition  is  that  saving 

^  Cf.  Cunynghame,  Geometrical  Political  Economy,  Lond.,  1904,  p.  100. 


266  The  Economic  Synthesis 

shall  be  unrestricted. — As  long  as  saving  is  restricted,  a  pro- 
ducer may  indeed  procure  the  passing  of  a  law  which  forbids 
to  any  other  person  the  production  of  his  commodity,  whereby 
he  obtains  a  commercial  monopoly  ;  but  the  more  advan- 
tageously situated  producer  cannot  effect  the  indefinite  ex- 
tension of  his  own  enterprise,  and  therefore — without  the  aid  of 
the  law — ^he  cannot  effect  the  total  or  partial  elimination  of  the 
other  producers.  Hence,  in  such  conditions,  the  price  of  the  pro- 
duct remains  commensurate  to  the  cost  of  production  incurred 
by  the  less  advantageously  situated  producers,  and  while  the 
monopoly  doubtless  secures  a  surplus-income  to  its  possessor, 
it  does  not  effect  a  diminution  of  the  income  of  the  producer 
who  is  excluded  from  the  monopoly,  nor  does  it  compromise 
the  vitality  of  that  income.  On  the  other  hand,  when  saving 
is  unrestricted,  the  more  favoured  producer,  being  able  to 
extend  his  productive  enterprise  as  much  as  he  will,  and 
being  able  to  satisfy  by  his  unaided  exertions  the  total 
demand  in  the  market,  lowers  the  price  of  the  product  to 
the  level  determined  by  its  cost  of  production,  and  below 
the  cost  of  production  incurred  by  rival  undertakings,  thus 
diminishing  the  income  of  these. — ^It  follows  from  this  that 
industrial  monopoly  cannot  function  as  a  method  of  struggle 
between  incomes  in  the  case  of  undifferentiated  income,  in 
which  saving  is  rigorously  Hmited.  Moreover,  even  in  those 
forms  of  differentiated  income  which  are  founded  upon  the 
ownership  of  man,  the  restrictions  imposed  upon  saving  are 
such  as  to  render  the  efficiency  of  industrial  monopoly  ex- 
tremely circumscribed.  It  is  precisely  because,  in  the  earlier 
economies,  this  obstacle  to  the  development  of  industrial 
monopoly  exists,  that  the  other  methods  of  struggle  between 
incomes  which  we  have  previously  examined  assume,  in  these 
economies,  so  predominant  an  influence.  Only  in  the  wage- 
economy  are  all  legal  shackles  upon  saving  removed,  only  in 
this  economy  does  the  development  of  machinery  and  there- 
with the  superiority  of  the  greater  recipients  of  income  over 
the  others  become  more  decisive  and  more  complete — ^and 
only  in  this  economy  does  industrial  monopoly  attain  the 
fullest  potency  of  which  it  is  capable,  to  become  the  supreme 
if  not  the  exclusive  arm  in  the  conflict  between  incomes. 
When  we  recall  the  fact  to  which  we  have  previously  referred, 


The  Distribution  of  Income  267 

that  of  all  the  forms  of  income,  undifferentiated  or  differen- 
tiated, the  wage-economy  is  the  only  one  in  which  there 
exists  free  competition  between  the  coercive  associations  of 
labour  producing  diverse  commodities,  we  recognise  this 
curious  antimony,  that  the  only  economic  form  in  which  free 
competition  prevails  is  precisely  the  one  in  which  industrial 
monopoly  becomes  the  fundamental  method  of  struggle 
between  incomes.  This  is  because  the  wage-economy,  whilst 
on  the  one  hand  it  gives  rise,  with  the  legal  freedom  of  the 
labourer,  to  free  competition  between  the  producers  of  diverse 
commodities,  gives  rise  on  the  other  hand,  with  unrestricted 
saving,  to  the  maximum  expansion  and  efficiency  of  monopoly  ; 
thus  it  happens  that  the  two  antagonistic  institutions  germinate 
contemporaneously  and  with  equal  necessity  in  consequence 
of  the  essential  characteristics  of  this  economic  system.^ 

The  object  of  industrial  monopoly  may  be  either  a  pro- 
ductive element  or  an  unproductive  element. — ^It  may  happen 
that  an  entrepreneur  secures  the  exclusive  use  of  better 
machinery  or  of  more  efficient  raw  material,  obtaining  the 
exclusive  use  of  one  or  the  other  by  contract  with  the  pro- 
ducers of  these  ;  and  in  such  a  case  the  victory  of  the  mono- 
polist entrepreneur  is  not  without  advantage  to  the  community 
at  large,  which  benefits  by  a  diminution  of  price  or  by  an  in- 
crement of  product.  It  may  happen,  on  the  other  hand, 
that  a  producer  gains  the  advantage  over  his  own  rivals 
by  securing  preferential  rates  from  the  transport  compam'es, 
or  by  the  use  and  abuse  of  advertisement,  or  by  the  process  of 
selling  his  product  below  cost,  or  by  a  falsification  of  the 
quality  of  the  product.  In  such  cases  the  victory  of  the 
monopolist  producer  is  not  accompanied  by  any  improvement 
in  production,  and  for  this  reason  there  does  not  arise  therefrom 
any  social  benefit. 

Sometimes  industrial  monopoly  results  from  the  operation 
of  law.  Without  going  back  to  the  economy  of  the  Middle 
Ages,  everywhere  interpermeated  with  exclusivism  and 
privilege,  and  confining  our  observation  to  our  own  epoch, 
we  not  infrequently  find  instances  of  legislative  intervention 
whereby  this  or  that  industry  is  placed  in  a  privileged  position, 

*  Cf.  the  remarkable  reflections  of  Oppenheimer,  Groaegrundbesitz  und 
aoziale  Frage,  Berlin,  1899,  pp.  149-50. 


268  The  Economic  Synthesis 

and  is  thus  enabled  to  struggle  victoriously  against  rival 
industries.  The  most  efficient  weapon  in  this  respect  is  that 
of  customs  duties  and  of  bounties  ;  we  have  an  eloquent 
example  of  this  in  the  struggle  between  the  linen  manufacture 
and  the  cotton  manufacture  of  contemporary  France.  The 
linen  manufacture — beaten  by  the  cotton  manufacture  in 
consequence  of  the  more  powerful  machinery  and  of  the  piece- 
work system  of  wages  which  stimulates  the  efficiency  of  the 
labour  employed  in  the  latter — ^seeks  to  save  itself  by 
demanding  the  free  importation  of  raw  linen  (this  rendering 
it  possible  to  procure  Russian  linen  at  a  lower  cost),  as 
well  as  a  bounty  on  national  production  to  the  extent  of 
2,500,000  francs,  heavy  import  duties  upon  linen  fabrics  and 
thread,  and  bounties  upon  exportation.  By  these  methods, 
enforced  by  a  strong  combine  among  the  producers,  this 
manufacture  is  enabled  to  carry  on  a  successful  struggle  with 
the  rival  manufacture.^  Similarly,  in  1875,  the  Enghsh 
Government  imposes  upon  India  an  import  duty  upon  raw 
cotton  in  order  to  paralyse  the  influence  of  the  Indian  duty 
upon  cotton  filatures,  and  to  render  it  impossible  for  the 
Indian  filatures  to  compete  with  those  of  Lancashire.  That 
is  to  say,  the  British  Government  intervenes  in  order  to  give 
the  British  cotton  spinners  a  position  of  greater  advantage  than 
their  Indian  competitors  ;  a  privilege  which  continues — ^not- 
withstanding the  abohtion  of  the  duty  just  mentioned — thanks 
to  the  reduction  and  subsequent  total  suppression  (1882)  of  the 
Indian  duty  upon  manufactured  cotton.  ^  Finally  every  country 
endeavours  to  struggle  against  foreign  producers  by  the 
imposition  of  tariffs  on  imports,  and  these  foreign  producers 
react  in  their  turn  by  various  compHcated  expedients.® 

The  most  interesting  example  of  the  struggle  between 
incomes  carried  out  by  means  of  legal  monopoly  is  afforded 
by  the  phenomenon  for  which  has  been  coined  in  England 

^  Aftalion,  La  crise  de  Vindustrie  liniere,  Paris,  1904. 

*  Syme,  Outlines  of  an  Indttstrial  Science,  Lond.,  1877,  pp.  73-7  ;  Dadab- 
hay  Naoroji,  Poverty  and  UnbriHsh  Rule  in  India,  Lond,,  1901,  pp.  61-2  ; 
Digby,  Prosperous  British  India,  Lond.,  1901,  p.  89. 

3  Thus  on  June  20th,  1902,  the  Rhenish -Westphalian  Coal  Syndicate  (and 
subsequently  other  coal  companies)  accords  a  bouiity  on  exportation  in 
order  to  counterbalance  the  import  duty  imposed  upon  the  product  by  foreign 
countries,  the  bounty  being  proportional  to  the  duty.  The  German,  Aus- 
trian, and  American  trusts  adopt  similar  tactics. 


The  Distribution  of  Income  269 

the  slang  name  of  dumping:  the  sale  of  the  privileged  com- 
modities at  exceptionally  reduced  prices  in  free  markets, 
compensated  by  an  abnormal  elevation  of  price  in  the  markets 
where  these  commodities  enjoy  a  privileged  position. — 
Occasionally  this  phenomenon  manifests  itself  within  a 
strictly  national  sphere,  as  in  Russia,  where  the  six  firms 
which  possess  the  monopoly  of  supplj'ing  railway  materials 
to  the  Government  sell  their  own  products  in  the  national 
market  at  prices  exceptionally  low,  and  ruinous  to  their 
competitors,  compensating  themselves  by  an  enormous  eleva- 
tion of  the  price  charged  to  the  State. ^  In  most  cases,  how- 
ever, the  phenomenon  we  are  here  considering  is  international 
in  character,  taking  the  form  of  the  sale  abroad  of  the  pro- 
tected commodity  at  an  exceptionally  low  price,  compensated 
by  a  correlatively  abnormal  elevation  of  price  (which  List 
formerly  declared  impossible  !)  in  the  protected  country.  For 
example,  the  ironworks  of  Bethlehem,  in  the  United  States, 
supply  armour-plate  to  the  Government  at  a  price  double  that 
for  which  they  sell  the  same  plate  abroad. — By  such  methods, 
the  national  producers,  whilst  they  forcibly  annex  a  part  of  the 
income  of  the  national  consumers  equal  to  the  surplus  price 
of  the  commodities  sold  to  these,  wage  a  victorious  campaign 
against  their  foreign  competitors,  and  diminish  the  incomes  of 
the  latter.  In  their  turn,  the  producers  who  are  damaged  by 
these  manoeuvres  are  compelled  to  contend  against  them, 
either  by  individual  initiative  or  by  legislative  measures  ;  and 
whilst  in  Germany  there  is  founded  a  Steel  Syndicate  which 
proposes  to  employ  the  method  of  selling  its  products  abroad 
at  specially  low  prices,  Canada  (1905)  retaliates  by  imposing 
duties  on  foreign  produce  imported  at  a  low  price.  But  this  does 
not  avail  to  suppress  a  method  now  widely  prevalent. — ^Tlie 
representatives  of  the  capitaHst  combines  practising  such 
methods  (in  Austria,  for  example),  continually  affirm  that  these 
are  the  essential  conditions  to  enable  an  industry  to  export  its 
products,  and  that  the  faculty  of  exportation  is  in  its  turn  a 
condition  sine  qua  non  to  enable  the  industry  to  attain  those 
vast  dimensions  which  will  aUow  the  introduction  of  the 
most  advanced  machinery  and  therefore  permit  of  production 

*  Ozeroff  [Economic  Russia],  p.  122. 


270  The  Economic  Synthesis 

at  minimal  cost.^  The  most  elementary  logical  powers  render 
it  easy  to  discover  the  fallacies  in  these  interested  arguments  ; 
for,  if  the  commodity  produced  by  the  new  and  more  perfect 
method  is  sold  abroad  at  a  loss,  this  alone  suffices  to  show  that 
this  commodity  is,  in  the  country  in  question,  produced  at  a 
higher  cost  than  elsewhere,  or  that  protection  keeps  ahve 
an  enterprise  weighted  by  an  additional  cost,  and  therefore 
anti-economical.  2  One  fact,  however,  emerges  very  plainly 
from  this  reasoning  :  that  such  manoeuvres  are  the  necessary 
condition  to  enable  the  industry  to  survive  the  troubles  of  a 
period  of  depression.  This  agrees  substantially  with  what  was 
pointed  out  in  the  beginning  of  the  present  chapter,  viz.,  that 
the  struggle  between  incomes  does  not  arise  from  the  deh  berate 
judgment  or  from  the  greed  of  the  recipients  of  income,  but  is 
the  necessary  outcome  of  the  restrictions  imposed  upon  pro- 
duction and  upon  income  by  the  coercive  association  of  labour. 
Fundamentally,  the  modern  warfare  which  is  carried  on  by 
means  of  tariffs  and  depreciated  exports  is  nothing  more  than 
a  form  aui  generis  of  the  international  war  between  incomes, 
which  is  waged  in  all  the  ages  under  the  impulsion  of  the  restric- 
tions imposed  upon  production  and  upon  income  by  the  coercive 
association  of  labour.  The  modern  capitalist  who  ruins  his 
foreign  rival  by  abnormally  lowering  the  price  of  products, 
works  in  a  similar  way  with  the  farmer  of  the  taxes  or  the  pro- 
consul of  classical  Rome  who  confiscates  a  part  of  the  income 
of  the  provincial  capitahsts  on  behalf  of  the  Latin  capitalists. 

1  Second  Series  of  Memoranda  on  British  and  Foreign  Trade  and  Industrial 
Conditions,  London,  1904,  p.  332. 

2  For  example,  let  us  suppose  that  hitherto  a  protectionist  country  has 
produced  a  given  commodity,  for  internal  consumption  only,  at  a  unitary  cost 
of  10,  whilst  in  other  countries  the  same  product  is  produced  at  a  cost  of  5. 
If,  now,  the  first  country  succeeds  in  selling  abroad  a  part  of  its  commodity 
at  the  price  of  5,  it  may  happen  that  this  extra  sale,  by  increasing  the  pro- 
duction of  the  given  commodity  diminishes  its  unitary  cost  below  10.  But 
the  very  fact  that  upon  the  quantity  sold  abroad  at  the  price  5  the  national 
producers  in  any  case  suffer  a  loss  which  must  be  compensated  by  a  correlative 
increase  in  the  price  at  which  the  commodity  is  sold  in  the  country  in  which 
it  is  produced,  shows  that  the  national  cost  of  the  product,  however  much 
diminished,  is  always  greater  than  5,  or  greater  than  the  cost  at  which  the 
product  is  sold  abroad,  that  is  to  say  that  protection  leads  to  production 
at  a  cost  greater  than  5  of  a  quantity  of  a  commodity  which  could  be  pro- 
duced and  purchased  at  a  cost  of  5  ;  that  is  to  say  that,  notwithstanding  the 
alleged  improvement  in  technique,  protection  always  involves  a  diminution 
in  the  productivity  of  labour.  Fontana-Russo  shows  this  very  clearly,  Trat- 
tato  di  politica  commerciale,  Milan,  1907,  p.  252. 


The  Distribtition  of  Income  271 

Just  as  in  the  days  of  antiquity,  so  now  in  our  own  times,  the 
cost  of  the  international  warfare  between  incomes  does  not 
fall  solely  upon  the  foreign  producer,  but  upon  the  national 
producer  himself,  who  has  to  pay  ransom,  as  producer  and 
consumer,  for  the  manoeuvres  of  predatory  enterprise. 

"  Alles  wiederholt  sich  nur  im  Leben, 
Ewig  jung  ist  nur  die  Phantasie." 

(Schiller.) 

Even  in  the  absence  of  any  legal  intervention,  industrial 
monopoly  has  a  large  field  of  expansion  in  the  contemporary 
economy,  and  has  plenty  of  opportunity  to  develop  the  most 
trenchant  and  terrible  weapon  of  the  contest  among  incomes. — 
This  process  manifests  itself  even  in  the  case  of  undifferentiated 
income  ;  and  in  England  we  see  the  Co-operative  Wholesale 
endeavouring  to  acquire  a  monopoly  at  the  expense  of  the 
autonomous  co-operative  mills  of  the  Rochdale  Pioneers,  of 
Oldham,  etc.  But  the  development  of  monopoly  is  naturally 
more  complete  in  the  case  of  differentiated  income,  wherein 
the  great  capitahsts,  for  the  very  reason  that  they  possess  a 
larger  capital,  find  themselves  in  a  position  of  monopoly  in 
relation  to  the  small  capitalists,  and  of  irresistible  monopoly, 
since  the  small  capitahsts,  however  much  they  attempt  to  save, 
can  never  attain  to  the  level  of  the  large  capitahsts. ^  If  the 
larger  incomes  do  not  find  themselves  placed  at  the  outset  in 
a  position  of  monopoly,  they  proceed  to  the  active  conquest  of 
that  position  by  means  of  coalition  ;  and  this  can  be  effectively 
established,  whatever  may  be  the  form,  the  kind,  or  the  degree 
of  income.  A  coalition  can  be  constituted  whatever  be  the  form 
of  income,  whether  differentiated  or  undifferentiated  ;  for  we 
encounter  it,  just  as  under  capitalism,  so  also  in  the  medieval 
guild,  and  in  the  modern  co-operative, ^  Coalition  (as,  for  the 
rest,  every  other  process  of  struggle  between  incomes)  can  be 
constituted  whatever  be  the  kind  of  income,  for  we  see  it  estab- 
hshed  equally  in  the  case  of  incomes  from  capitalised  property 

1  Boiirguin  doubts  this,  Systemes,  pp.  164,  et  seq. 

2  In  England,  in  recent  years,  amalgamations  have  frequently  been  effected 
among  the  co-operative  societies  operating  in  the  same  area,  from  which 
there  results  a  process  of  co-operative  concentration  which  in  many  respects 
surpasses  the  analogous  process  simultaneously  occurring  in  the  capitaUst 
sphere  (Bourguin,  loc.  ciL,  p.  224). 


272  The  Economic  Synthesis 

and  in  the  case  of  professional  incomes.  Thus,  whilst  in  France 
there  is  founded  a  coalition  of  dramatic  authors,  which  imposes 
upon  its  members  particular  modes  of  dramatic  representation 
and  particular  theatres,  and  penahses  non-members — on  the 
other  side  of  the  Atlantic  the  theatrical  combine  imposes 
yet  more  rigid  restrictions,  while  the  newspapers  fall  more  and 
more  into  the  power  of  the  trusts,  who  make  of  them  an 
undertaking  for  the  interested  manipulation  and  systematic 
perversion  of  public  opinion.  As  other  examples  of  the  coaHtion 
of  the  unproductive  labourers,  may  be  mentioned  the  indis- 
soluble cliques  formed  by  certain  university  professors,  which 
provide  for  their  members  extensive  emoluments.  Need  we 
give  further  instances  ?  Not  long  since  in  Philadelphia  and  in 
other  large  towns  of  the  United  States,  there  is  organised  a 
real  "  brothel  trust,"  comprising  all  the  panders,  the  white-slave 
traders,  and  the  brothel-keepers  ;  and  the  trust  consohdates  its 
power  by  means  of  friendly  agreements  with  the  police. — 
Finally,  coaHtion  may  be  effected  between  incomes  of  any  and 
every  degree.  Whilst  the  incomes  most  prone  to  combination 
are  undoubtedly  the  smaller  and  the  medium  incomes,  whilst 
the  maximum  incomes  commonly  prefer  to  participate  in  the 
struggle  as  independent  entities,  the  possibility  of  a  coalition 
even  among  the  greater  incomes  cannot  be  excluded,  and  of  this 
we  see  examples  increasing  in  frequency  in  the  capitaHst  cartels 
and  syndicates.^ 

The  larger  incomes,  having  thus  attained  a  privileged 
position,  make  use  of  it  to  gain  a  monopoly  of  especially 
lucrative  kinds  of  production  or  of  especially  lucrative  busi- 
nesses. In  Germany,  for  example,  the  electro-technical 
companies,  weakened  by  a  terrible  crisis  due  to  overproduction 
and  to  excessive  expenditure  upon  plant,  therefore  endeavour 
to  get  business  by  the  most  ingenious  machinations.  Thus 
the  Deutsche  Gesellschaft  fiir  Elektrische  Unternehmungen, 
and  the  company  of  Siemens  and  Halske,  fight  with  one  another 
to  get  possession  of  the  lucrative  business  involved  in  the 
electrifying  of  the  BerHn-Charlottenburg  tramway,  and  inflal  e 
the  shares  to  a  premium  of  270%,  whilst  the  existing  company 

*  Tlius,  in  the  year  1903,  the  competition  of  the  Deutsche  Bank  leads  to  an 
amalgamation  of  the  Dresdener  Bank  with  the  A.  Schaffhausenacher  Bank- 
verein — the  first  amalgamation  of  German  banks. 


The  Distribttfton  of  Income  273 

rarely  pays  a  dividend  of  5%.  The  first-named  company 
triumphs  in  the  struggle,  and  can  in  addition  sell  its  own  shares 
at  a  profit.  1  At  Genoa,  the  houses  of  Odero  and  Ansaldo- 
Armstrong  fight  for  shipbuilding  orders,  and  endeavour  in 
every  possible  way  to  force  down  one  another's  shares. — \n 
like  manner,  in  the  United  States,  in  May,  1901,  the  Morgan 
group  and  the  Gould  group  engage  in  a  tremendous  struggle 
to  get  possession  of  the  shares  of  the  Northern  Pacific  Railway  ^  ; 
whilst  the  agreement  between  the  cotton-spinning  firm  of 
Newski  in  Petersburg  and  the  Enghsh  J.  P.  Coats  syndicate 
gives  to  the  former  the  exclusive  right  of  representing  the 
EngHsh  syndicate  in  the  sale  of  cotton-thread  in  Russia,  and 
thus  gives  the  Russian  firm  a  monopolist  position.^ 

More  frequently,  however,  the  larger  incomes  make  use  of 
their  financial  superiority  to  gain  the  monopoly  of  a  given 
productive  or  unproductive  element,  or  of  its  more  efficient 
kinds.  Sometimes  the  larger  capitaHsts  corner  the  whole  of  the 
raw  material,  rendering  it  impossible  for  their  weaker  rivals 
to  procure  any.  Thus  the  Standard  Oil  Company  gives 
bounties  to  the  producers  of  crude  petroleum  in  those  localities 
in  which  rival  refineries  exist,  in  order  to  obtain  the  exclusive 
use  of  the  raw  material  and  to  starve  out  the  rival  enterprises.* 
Sometimes  the  larger  capitalists  gain  a  monopoly  of  labour,  as 
was  done  in  1883  by  certain  English  entrepreneurs^;  whilst 
in  the  year  1903,  in  the  United  States,  the  George  A.  Fuller 
Company,  a  firm  of  builders,  brought  about  by  means  of  bribery 
a  strike  among  the  workers  employed  by  rival  fu-ms,  thus  de- 
priving these  of  the  necessary  labourers. — Sometimes,  on  the 
other  hand,  the  larger  aggregation  of  capital  conquers  for  itself 
privileged  zones  of  territory  or  more  advantageous  conditions  of 
credit.  Thus  in  Germany  the  larger  mills,  already  possessing 
the  effective  monopoly  of  the  more  productive  machinery,  get 
possession  of  the  regions  nearest  to  the  Rhine,  this  enabling 
them  to  take  advantage  of  the  lowest  tariffs  of  the  shipping 

*  Die    Storungen    in    deutschen    Wirtschaftsleben    wdhrend    1900    und   ff., 
Leipzig,  1903,  III,  p.  125. 

*  Cassola,  I  sindacati  industriali,  Bari,  1905,  p.  323. 
3  ["  Russian  National  Economy  "],  1904,  II,  p.  108. 

*  hidustrial   Commission^   Preliminary   Report  on   Trusts   and  Industrial 
Combinations,  Washington,  1900,  p.  17. 

'  Webb,  History  of  Trades  Unionism,  London,  1894,  pp.  118,  et  seq. 

T 


274  The  Economic  Synthesis 

firms,  and  giving  them  in  addition  a  monopoly  of  credit  upon 
easy  terms,  for  the  city  of  Strasburg  alone  lends  three  millions 
of  marks  at  3%  for  the  building  of  the  Giant  Mill  which  begins 
work  on  January  1st,  1904,  and  provisions  the  whole  of 
Wurtemberg.^  Finally  many  capitalists  endeavour  to  obtain  a 
monopoly  of  the  most  suitable  unproductive  elements,  or  the 
exclusive  use  of  the  more  far-reaching  and  subtle  methods  of 
success.  In  consequence  of  all  this,  a  conscientious  observer 
does  not  hesitate  to  affirm  that  it  is  doubtful  whether,  through- 
out the  whole  field  of  modern  industry,  there  exists  a  single 
successful  undertaking  into  whose  success  there  enters  no 
element  of  monopoly.  ^ 

The  recipients  of  the  larger  incomes,  singly  or  in  combination, 
having  thus  obtained  a  monopoly  of  the  more  efficient  instru- 
ments, productive  or  unproductive,  make  use  of  their  monopoly 
to  sell  at  very  low  prices,  which  are  ruinous  to  their  com- 
petitors.— ^Thus  the  great  German  flour-mills  are  able  to  grind 
at  very  low  prices,  bringing  about  the  impoverishment  and  the 
ruin  of  their  rivals.  In  the  United  States,  the  manufacturing 
combines  are  accustomed  to  sell  their  products  below  cost  in 
places  where  they  meet  with  competition,  thus  reducing  their 
competitors  to  an  extremity,  recouping  the  loss  by  seUing 
above  cost  in  places  where  there  is  no  competition^ ;  whilst  the 
Newski  manufacturing  firm,  already  enjoying  a  position  of 
monopoly  in  virtue  of  protection,  makes  use  of  the  agreement 
with  Coats,  previously  mentioned,  to  lower  the  price  of  its 
products,  whenever  necessary,  in  such  a  way  as  to  drive  any 
possible  competitors  out  of  the  field.  In  Germany  the  larger 
banks,  whilst  refusing  credit  to  any  institution  which  en- 
deavours to  compete  with  them  by  founding  non-licensed  loan 
institutions,  carry  on  business  at  rates  so  low  as  to  prove 
ruinous  to  their  less  favoured  competitors.  We  see  that,  how- 
ever obtained,   and  in   whatever   way  developed,  industrial 

1  Jahrbucherf.  N.  (E.,  1904,  pp.  605-6. 

*  Veblen,  Theory  of  Business  Enterprise,  p.  54. 

3  Cassola,  loc.  ciL,  p.  226  ;  Syme,  loc.  cit.,  pp.  60,  ei  seq.  ;  Lloyd,  Wealth 
against  Commonwealth,  New  York,  1894,  pp.  426,  et  seq.  This  is  another  case 
of  national  "  dumping,"  A  further  instance  of  this  occurs  in  Belgium,  where 
the  capitalists  force  their  workers  to  buy  from  their  own  factories,  at  very 
high  prices,  the  commodities  of  which  they  have  need — this  permitting  the 
sale  of  the  remainder  at  a  low  price. 


The  Distribution  of  Income  ttj^ 

monopoly  displays  itself  as  a  mighty  weapon  in  the  contest 
between  incomes. 

2.  Commercial  Monopoly. — ^Inasmuch  as  every  exchange 
relationship  presupposes  the  existence  of  two  contracting 
parties,  a  seller  and  a  buyer,  it  follows  that  commercial 
monopoly  may  be  of  two  different  kinds  according  as  it  is 
exercised  by  sellers  or  by  buyers.^  Now  if  it  be  true,  as 
Webb  and  Oppenheimer  point  out,  that  competition  is  much 
more  intense  between  sellers  than  between  buyers,  inas- 
much as  the  latter  are  more  often  able  to  wait,  it  is  none 
the  less  true  that  sellers  much  more  readily  succeed  in  com- 
bining one  with  another,  and  in  thus  acquiring  a  monopoly 
as  against  the  buyers.  Sometimes  this  monopoly  develops, 
thanks  to  the  assistance  of  the  law.  Thus,  in  Rome  the 
dardanarii  possess  the  legal  monopoly  of  trading  in  agricultural 
produce,  and  they  make  use  of  this  monopoly  to  restrict  supply 
and  put  up  prices. 2  Even  the  craft-guilds  are,  in  substance, 
nothing  else  than  legal  monopolies  of  sellers  enriching  them- 
selves at  the  expense  of  the  cultivators  of  the  soil  who  buy 
manufactured  articles.^  In  Italy,  again,  before  the  law  of 
1902,  "in  cases  in  which  the  retailers  in  a  commune  have 
themselves  undertaken  to  farm  the  octroi  duties,  they  are  able 
to  assess  the  duty  upon  flour  in  such  a  way  as  to  make  trade 
impossible  for  new  bakers  who  might  wish  to  break  the 
monopoly.  Thus  the  established  bakers  prevent  any  com- 
petition which  might  lower  prices."*  Here  we  have  a  sellers' 
monopoly  instituted  by  law,  or  deriving  its  opportunity  from 
law.  Again,  the  monopoly  of  the  home-market  which  results 
from  a  protective  tariff,  raising  within  that  market  the  price  of 

^  Ely  {Studies  in  the  Evolution  of  Industrial  Society,  New  York,  1903) 
distinguishes  commercial  competition,  or  competition  between  producers  of 
the  same  commodity,  the  result  of  which  is  to  reduce  the  value  of  products 
to  the  cost  of  production,  from  industrial  competition,  or  competition  between 
producers  of  different  commodities,  the  result  of  which  is  to  equalise  rates  of 
profit.  It  seems  to  me,  however,  that  these  designations  should  be  inverted, 
so  that  in  the  first  case  we  should  speak  of  industrial  competition,  and  in  the 
second  of  commercial  competition.  Thus  the  suppression  of  competition 
would  give  rise,  in  the  first  case,  to  industrial  monopoly,  and  in  the  second 
case,  to  commercial  monopoly. 

2  Daremberg  and  Saglio,  Dictionnaire  des  antiquites,  "  Dardanarii." 

'  Adam  Smith,  loc.  cit.,  pp.  112-3. 

*  Relazione  della  Conimissione  Parlamentare  sui  progetti  finanziari  May 
7th,  1901,  p.  18. 


276  The  Econo7nic  Synthesis 

the  raw  material  of  industry,  inflicts  upon  the  producers  of  the 
manufactured  article  a  loss  which  is  merely  diminished  but  not 
altogether  removed  through  the  partial  reimbursement  of  the 
surplus  price  which  is  paid  to  the  exporters  of  this  com- 
modity.— But  also  in  the  absence  of  any  aid  from  law,  the  sellers 
are  able  to  effect  a  monopoly  by  forming  combines.  We  need 
merely  refer  to  corners  and  rings ;  or  to  combines  on  the  part 
of  retail  traders,  who  impose  upon  the  buyers  increasing  surplus 
prices.  1 

For  example,  in  the  United  States,  the  Beef  Trust  of  Chicago 
effects  a  notable  rise  in  the  price  of  meat.  And  since  the  retail 
butchers,  by  way  of  reprisal,  close  their  shops,  the  Trust  sends 
its  own  agents  to  buy  up  all  the  eggs  in  the  market,  and  this,  by 
rendering  eggs  dearer  than  meat,  leads  to  the  immediate  re- 
opening of  all  the  butchers'  shops. 2  The  Standard  Oil  Trust 
possesses  the  monopoly  of  the  sale  of  refined  petroleum,  and  is 
therefore  able  to  put  up  the  price  of  this  article  far  above  the 
cost  of  production. — ^In  England,  in  January,  1896,  there  is 
founded  the  Proprietory  Articles  Trade  Association,  a  combine 
of  manufacturers,  wholesale  merchants,  and  retail  traders, 
whose  aim  is  to  raise  prices  to  the  detriment  of  the  consumer.^ 
In  Germany,  again,  many  commodities  have  undergone  a 
serious  rise  in  price  owing  to  the  monopoHes  exercised  by  sellers' 
combines.  *  Sometimes,  on  the  other  hand,  the  monopoly  is  not 
that  of  sellers  as  against  ultimate  consumers,  but  that  of  sellers 
of  one  stage  as  against  sellers  of  a  subsequent  stage — ^for 
example,  of  producer-sellers,  or  of  wholesale  traders,  as  against 
retailers,  or  of  producer-sellers  of  raw  material  as  against 
manufacturers.  An  example  of  the  first-mentioned  kind  of 
combine  is  afforded  by  the  struggle  that  took  place  in  England 
in  the  autumn  of  the  year  1906  between  the  producer-sellers 
of  soap  and  the  retailers  of  this  article  ;  for  the  former  wished 
to  put  up  the  selling  price  of  their  product  ;  while  forbidding 
the  latter  to  effect  a  corresponding  increase  in  price  on  resale.^ 

*  Baker,  loc.  cit.,  p.  78. 

'  Comelissen,  La  thdorie  de  la  valeur,  Paris,  1903,  p.  397. 
'  Macrosty,    The   Trust   Movement  in   British   Indiistry,    London,    1907, 
pp.  249,  et  seq. 

*  Calwer,  Wirtschaftsjahr  1905,  xvi. 

*  Macrosty,  loc.  cit.,  pp.  262-3. — [The  history  of  the  attempt  of  Mr.  Lever 
and  other   great  soap-prdprietors  to  form  a  combine,  and  of  the  defeat  (or 


The  Distribution  of  Income  277 

An  example  of  the  second  kind  of  combine  we  find  in  Germany, 
where  the  producers  of  raw  material  practise  the  most  mon- 
strous extortions  upon  the  producers  of  manufactured  articles 
who  are  forced  to  be  their  customers,  it  may  be  by 
reserving  the  right  of  withholding  supply  in  case  of  jorce 
majeure,  or  the  right  of  arbitrarily  reducing  the  quantity 
supphed,  or  of  giving  no  guarantee  as  to  the  quality  of  the 
commodity,  or  it  may  be  by  putting  up  the  price  to  an  abnormal 
level. — ^Thus,  in  the  beginning  of  the  year  1900,  whilst  the 
syndicate  of  mine-owners  imposes  difficulties  upon  the  iron- 
masters by  putting  up  the  price  of  coal,  the  combined  producers 
of  coke  and  of  pig-iron  insist  on  the  iron-smelters,  who  have  to 
buy  these  products,  making  contracts  in  advance  for  the  year 
1901.  The  price  of  coke  for  1901  is  raised  by  these  contracts  to 
20  marks  per  ton,  while  the  price  for  1900  is  14  marks,  so  that 
the  average  price  for  the  two  years  becomes  17  marks.  The 
iron-smelters,  who  are  passing  through  a  period  of  prosperity, 
are  forced  to  agree  ;  but  when  the  period  of  depression  super- 
venes they  suffer  from  the  onerous  stipulations,  and  vainly 
endeavour  to  have  them  rescinded. — ^The  smaller  metal-plate 
manufacturers  are  especially  hard  hit,  for  they  are  forced 
to  pay  correlatively  enormous  prices  for  the  raw  material 
supplied  to  them  by  their  trade  rivals,  the  great  armour-plate 
manufacturers,  these  being  at  the  same  time  producers  of  the 
raw  material ;  nor  is  the  damage  thus  inflicted  adequately 
repaired  by  the  attempt,  too  often  abortive,  to  found  co-opera- 
apparent  defeat)  of  this  attempt  by  the  halfpenny  newspapers,  affords  an 
interesting  example  of  another  aspect  of  the  struggle  between  incomes,  the 
struggle  in  this  instance  being  between  productive  capital  invested  in  the 
manufacture  of  soap  and  unproductive  capital  invested  in  newspaper  enter- 
prise. The  matter  is  well  put  by  H.  G.  Wells  as  follows  (JVety  Worlds  for  Old, 
pp.  204-5)  :  "  Whether  the  public  would  have  benefited  greatly  or  not  is 
beside  the  present  question  ;  Mr.  Lever  and  other  great  soap -proprietors 
would  certainly  have  benefited  enormously  ...  by  working  as  a  collective 
interest  instead  of  as  independent  private  owners.  But  .  .  .  Mr.  Lever 
reckoned  without  another  great  system  of  private  adventurers,  the  halfpenny 
newspaper  proprietors,  who  had  hitherto  been  drawing  large  sums  from  soap 
advertisement,  and  who  had  in  fact  been  so  far  parasitic  on  the  pubHo 
soap  supply.  One  group  of  these  papers  at  once  began  a  campaign  against 
the  '  Soap  Trust.'  .  .  .  They  accused  Mr.  Lever  of  nearly  every  sort  of 
cheating  that  can  be  done  by  a  soap-seller,  and  anticipated  every  sort  of 
oppression  a  private  monopolist  can  practise.  In  the  end  they  paid  un 
precedented  damages  for  hbel,  but  they  stopped  Mr.  Lever's  intelligent  and 
desirable  endeavours  to  replace  the  waste  and  disorder  of  our  existing  soap 
supply  by  a  simple  and  more  efficient  organisation." — Translator's  Note.  ] 


278  The  Economic  Synthesis 

tive  steel  works.  ^  Here  we  observe  an  interesting  combination 
of  industrial  monopoly  with  commercial  monopoly.  The  larger 
manufacturers,  being  at  the  same  time  producers  of  raw 
material,  sell  this  last  at  high  prices  to  the  lesser  manufacturers, 
while  they  sell  the  manufactured  article  to  the  consumer  at  a 
low  figure,  which  is  ruinous  to  their  smaller  competitors  ;  in 
this  way,  after  the  large  men  have  opened  the  attack  on  the 
small  ones  by  means  of  commercial  monopoly,  the  former 
complete  the  ruin  of  the  latter  by  means  of  industrial 
monopoly.  2  Finally,  we  sometimes  find  the  inverse  kind  of 
monopoly,  or  that  possessed  by  the  producers  of  one  stage  as 
against  those  of  the  stage  before,  that  of  manufacturers  as 
against  producers  of  raw  material.  In  Italy,  for  example,  the 
Eridania  company,  having  bought  a  controlHng  interest  in  the 
shares  of  the  Zuccherificio  Ostigliese,  succeeds  in  blocking  all 
proposals  on  the  part  of  the  latter  firm  to  add  a  sugar-refinery 
to  its  enterprise,  this  forces  the  last-named  company  to  have 
recourse  to  the  Eridania  sugar  refinery,  and  the  Eridania 
company,  taking  advantage  of  its  monopoly,  sells  its  services 
under  conditions  so  arduous  as  to  reduce  the  dividends  of  the 
Zuccherificio  Ostigfiese  to  zero  and  to  force  down  the  price  of 
the  latter 's  shares  to  a  very  low  figure.  Subsequently  the 
rival  company,  taking  advantage  of  this  state  of  affairs,  has 
acquired  all  the  shares  of  the  sweet-manufacturing  firm,  and 
then  only  the  fortunes  of  this  last  are  finally  restored. 

No  less  striking  are  the  manifestations  exhibited  by  the 
monopoly  of  buyers,  the  theory  of  which  has  already  been  re- 
ferred to  in  the  first  chapter.  This  monopoly  also  is  sometimes 
instituted  by  law.  Thus,  in  Germany,  in  former  times,  the 
complicated  legislative  interference  in  the  weekly  markets 
and  with  the  right  of  option  tends  to  modify  the  relations 
of  demand  and  supply  between  the  burgher  who  buys  and  the 
peasant  who  sells,  altogether  to  the  advantage  of  the  former ^  ; 
whilst  the  same  result  is  attained  by  the  city  taxation  of 
prices,  the  law  of  the  maximum.     On  June  10th,  1358,  the 

1  Kontradiktorische  Verhandlungen  iiber  deuische  Kartelle,  Berlin,  1903, 
I,  pp.  173-4,  193,  198-9  ;  III,  p.  646,  pp.  653-4,  et  seq. 

2  Sinzheimer,  Wirtschaftliche  Kdmpfe  der  Gegenivart,  "  Jahrb.  fur  Gesetzg.," 
1908,  p.  28. 

^  Schmoller,  Studien  uber  die  Wirtschaftepolitik  Friedrichs  des  Croascn, 
'•  Jalirbuch  fur  Ges.,"  1884,  p.  19. 


The  Distribution  of  Income  2']() 

pontifical  court  of  Avignon  decrees  that  no  member  of  the 
clergy  shall  buy  wine  or  grapes  in  Nimes,  because  the  magis- 
trates and  other  burghers  demand  an  excessive  price  from 
the  ecclesiastical  Camera  ;  that  is  to  say,  by  means  of  law  the 
court  restricts  or  annuls  the  demand  for  certain  specified 
commodities  in  order  to  force  the  sellers  of  these  to  accept 
more  reasonable  prices.^  Even  the  sumptuary  laws  have  it  as 
their  essential  aim  to  reserve  for  certain  classes  a  monopoly  in 
buying  certain  products,  thus  constraining  the  sellers  of  these 
to  lower  their  prices.  But  the  same  end  is  attained  without 
recourse  to  law  by  means  of  secret  or  avowed  combinations 
among  the  buyers.  We  have  a  notable  example  of  this  in  the 
buying  of  agricultural  produce.  Without  going  back  to  the 
combines  among  the  buyers  of  agricultural  produce,  which 
were  so  eloquently  denounced  by  our  classical  economists  of  the 
seventeenth  and  eighteenth  centuries,  and  which  forced  the 
agriculturists  to  accept  unremunerative  prices, ^  we  see  in 
England  to-day  that  the  producers  of  hops  are  impoverished 
by  a  combine  among  the  dealers,  the  dealers  forcing  the 
producers  to  accept  derisory  prices  for  their  product,  or  binding 
them  down  by  craftily  conceived  anticipatory  agreements ' ; 
in  Russia  the  refiners  of  resin  are  constrained  to  sell  at  low 
prices  to  the  dealers  ;  in  France  the  agriculturists  find  them- 
selves unable  to  profit  by  the  bounties  paid  to  the  breeders  of 
silk-worms,  because  the  middlemen  and  the  buyers  succeed  in 
getting  possession  of  the  whole  amount ;  and  in  Germany  the 
sugar-refiners  force  the  sugar-beet  growers  to  sell  their  product 
at  a  depressed  price.* 

Such  phenomena  attain  the  most  remarkable  development 
in  the  United  States.  Here,  in  fact,  whilst  the  trust  of  butchers 
lowers  the  price  at  which  meat  is  purchased  to  a  figure  ruinous 
to  the  cattle-breeders — ^the  butchers,  as  we  have  seen,  being  in 

1  Arias,  Per  la  storia  economica  del  secolo  XIV,  Rome,  1905,  pp.  53-4. 
In  the  fifteenth  century  the  founders  of  the  Bank  of  Pirano  (Istria)  have  the 
right  of  buying  wine  only  after  August  loth,  and  of  buying  oil  only  after 
May  8th  ;  the  aim  of  these  restrictions  assuredly  being  to  keep  down  prices 
("  Revue  des  etudes  juives,"  April-June,  1881). 

2  Montanari,  Delia  moneta  (1683),  C.P.A.  ;  III,  p.  61  ;  Galiani,  Delia 
moneta  (1750),  C.P.M.,  III,  p.  181,  IV,  p.  147;  Cf.  also  Hermann,  Staataw. 
XJnters.,  1874,  p.  425. 

*  Haggard,  Rural  England,  London,  1903,  I,  p.  173. 

•  Bourguin,  Lea  systemes  aocialistea,  pp.  161,  235. 


28o  The  Economic  Synthesis 

their  turn  victimised  by  other  manoeuvres — ^the  combines 
formed  by  the  buyers  of  wheat,  cotton,  and  wool,  succeed,  with 
much  disturbance,  in  forcing  down  the  price  of  these  com- 
modities. If  the  American  merchants  succeed  in  lowering  the 
price  of  agricultural  produce,  this  is  not  so  much  due  (as  is 
usually  maintained)  to  speculation,  as  to  the  monopoly  which, 
the  merchants  enjoy  as  against  the  cultivators  ;  so  true  is  this 
that  the  distribution  of  the  total  value  of  wheat  between  the 
merchant  and  the  seller  differs  in  the  case  of  various  portions 
sold  in  a  degree  proportional  to  the  var3dng  intensity  which  is 
exhibited  at  one  time  or  another  by  the  monopoly  of  the 
buyers.^  The  notable  depression  of  agricultural  prices  which 
annually  manifests  itself  all  over  the  world  towards  the  middle 
of  the  summer  is  deliberately  effected  by  the  buyers,  whose 
aim  is,  by  the  diffusion  of  false  reports  as  to  the  probable 
abundance  of  the  harvest,  to  bring  about  a  fall  in  prices  which 
will  enable  them  to  buy  to  advantage. ^ 

The  agricultural  producers  seek  to  oppose  these  manoeuvres, 
by  restricting  or  regulating  the  sale  of  their  produce,  by 
founding  rural  banks,  by  certificates  of  deposit  for  agricultural 
products,  advances  upon  commodities,  institutes  for  providing 
agriculturists  with  trustworthy  information  upon  conditions  of 
prices  and  of  production.  In  Texas,  there  are  founded  the 
Truck  Farmers'  Organisations,  whose  aim  is  to  obtain  a 
reduction  of  the  railroad  freights  which  have  hitherto  absorbed 
the  whole  agrarian  profit.  In  Bavaria,  the  landowners,  to 
avoid  the  necessity  of  having  to  sell  their  crops  prematurely, 
form  a  society  for  the  sale  of  agrarian  produce.  The  very 
prohibition  of  time-bargains  in  wheat  and  flour,  which  is 
imposed  in  Germany  by  the  law  of  June  22nd,  1896,  is  nothing 
else  but  a  means,  however  ineptly  conceived,  directed  against 
the  manoeuvi'es  of  the  buyers  of  wheat.  In  France,  on  June 
16th,  1902,  there  is  founded  V  Union  Internationale  des  Cours  du 
Ble,  whose  aim  it  is  to  observe  the  prices  quoted  on  the  different 

1  Report  of  the  Industrial  Commission  of  the  United  States,  1900,  pp.  222, 
332,  etc.  For  example,  in  the  year  1899,  in  the  city  of  Kansas,  the  distribu- 
tion of  the  price  of  wheat  between  the  merchant  and  the  producer  varied 
from  12-49%  to  the  merchant  and  87*51%  to  the  producer  to  30*21%  to  the 
merchant  and  69*79%  to  the  producer  {Ibid.). 

2  Paisant,  LHndirizzo  del  mercato  dei  cereali  ed  in  particolare  del  frumento. 
"  Atti  del  VII  Congresso  Intemazionale  di  agricoltura,"  Rome,  1903,  I, 
pp.  9,  et  seq. 


The  Distribution  of  Income  281 

bourses  ;  to  collect,  by  means  of  national  agricultural  organisa- 
tions, the  data  of  the  elements  which  concur  in  determining 
the  prices  of  the  day,  data  relating  to  the  extension  of  the  land 
planted  with  grain  crops,  to  harvests,  to  visible  and  invisible 
reserves,  to  the  trade  in  agricultural  produce,  and  to  agrarian 
legislation.  Two  years  later,  however,  the  union  is  dissolved 
from  lack  of  funds.  Tlfit  Green  Inter  national  ^  as  I  have 
nicknamed  the  recently  founded  International  Institute  of 
Agriculture,  which  may  the  Lord  increase  and  prosper,  aims 
at  enjoying  the  inheritance  of  the  defunct  Union  or  at 
fulfilling  the  same  ends  with  vaster  means. 

It  is  not,  however,  in  rural  industry  that  combination  among 
buyers  attains  to  its  most  notable  and  most  plastic  manifesta- 
tions. A  stormier  and  vaster  field  is  occupied  by  the  satanic 
orgies  of  the  petroleum  industry,  where  the  refiners,  having 
formed  a  gigantic  combine  (The  Standard  Oil  Trust),  which 
gives  them  a  practical  monopoly  of  the  purchase  of  crude 
petroleum,  force  the  producers  of  petroleum  to  accept  prices 
that  are  systematically  depressed.  In  this  case  we  have  a 
phenomenon  which  is  the  inverse  of  that  above  described  as 
happening  in  Germany.  In  Germany  it  is  the  combine  of  the 
sellers  of  the  raw  product  (coke  and  pig-iron)  which  victimises 
the  manufacturers  who  are  forced  to  buy  from  it.  In  America, 
on  the  other  hand,  it  is  the  combine  of  the  buyers  of  the  raw 
product  (crude  petroleum)  which  victimises  those  who  produce 
that  product.  With  this  end  in  view  the  Oil  Trust  begins  by 
constraining  the  railways  to  impose  differential  tariffs  for  the 
transport  of  crude  petroleum,  and  to  add  the  surplus  income 
thus  received  to  the  funds  of  the  combine  ;  the  next  proceeding 
is  the  more  decisive  one  of  fixing  the  price  of  crude  petroleum 
at  a  figure  which  is  unremunerative  to  the  producers.  These 
latter  vainly  endeavour  to  hit  back  by  stopping  production  for 
six  months,  and  by  federating  themselves  in  their  turn  (to  form 
the  Producers'  Union) ;  for  in  the  year  1872  the  Oil  Trust 
succeeds  by  means  of  ingenious  compromises  in  paralysing  the 
new  association,  and  finally  in  destroying  it.  Reconstituted  six 
years  later,  the  Producers'  Union  endeavours  to  build  a  line  of 
its  own  to  the  sea-coast,  and  to  obtain  the  passage  of  a  law 
forbidding  differential  railway  rates  ;  but  Congress,  in  the  pay 
of  the  Oil  Trust,  rejects  the  Bill.    The  Oil  Trust  meanwhile 


282  The  Economic  Synthesis 

refuses  to  receive  crude  petroleum  for  transmission  by  the  pipe 
lines  except  for  immediate  despatch,  and  at  a  price  below  that 
current  in  the  market  ;  and  the  attempts  of  the  producers, 
endeavouring  to  defend  themselves  by  building  their  own 
reservoirs,  prove  unsuccessful.  Vainly  the  Producers'  Union 
brings  actions  against  the  Oil  Trust,  accusing  the  Trust  of 
conspiring  in  restraint  of  trade  ;  until,  in  1880,  after  innumer- 
able postponements,  the  Oil  Trust  forces  a  new  compromise 
upon  the  chief  producers,  leading  the  latter,  who  are  now 
discouraged,  to  dissolve  their  second  federation.  Not  until 
1887,  after  a  series  of  discreditable  transactions  and  unfortunate 
conflicts,  does  the  Producers'  Union  rise  again  under  the  name 
of  the  Producers'  Productive  Association,  but  this,  having  been 
dissolved  by  the  machinations  of  the  Oil  Trust,  which  bribes 
some  of  the  leaders  among  the  producers,  is  soon  reconstituted 
under  the  name  of  the  Producers'  Oil  Company,  subsequently 
transformed,  by  means  of  an  aUiance  with  certain  independent 
refiners,  into  the  Producers'  and  Refiners'  Oil  Company  (1893). 
This,  after  a  series  of  fierce  struggles  with  the  Oil  Trust, 
succeeds  in  effecting  an  alHance  with  a  Pipe  Line  Company, 
which  opens  the  greatly  desired  access  to  the  sea,  allying  itself 
also  with  fourteen  independent  refineries,  and  taking  the 
form  at  length,  in  the  year  1900,  of  the  Pure  Oil  Compan}^ 
henceforward  a  formidable  rival  to  the  gigantic  corporation 
hitherto  alone  dominant.^  This  epic  contest,  of  which  merely 
the  leading  features  have  here  been  summarised,  affords  a  tj^pical 
instance  of  a  monopoly  of  buyers  who  succeed  in  annexing  to 
their  income  part  of  the  income  of  the  sellers  ;  which  induces 
the  sellers  to  react  by  forming  a  combine  in  their  turn,  or  by 
combining  with  a  portion  of  the  buyers,  that  is  to  say,  to  meet 
the  first  monopoly  by  an  antagonistic  monopoly.  ^ 

3.  Credital  Monopoly. — Credital  monopoly  also  is  a  for- 
midable weapon  in  the  struggle  between  incomes.    We  see  the 

1  Consult  the  work  previously  quoted  of  Ida  Tarbell,  These  practices  of 
the  Standard  Oil  Trust,  and  other  proceedings  of  the  same  corporation 
described  in  earlier  pages,  are  by  no  means  to  be  regarded  as  the  specialty  of 
this  particular  syndicate,  for  they  repeat  themselves,  in  a  more  or  less  similar 
form,  in  the  operations  of  all  the  capitalist  combines. — For  example,  regard- 
ing the  analogous  activities  of  the  Tobacco  Trust,  consult  Russell,  Lawless 
Wealth,  New  York,  1908,  pp.  180-2. 

2  "  As  a  nail  holds  fast  in  the  crack  between  two  stones,  so  sin  holds  fast 
between  buying  and  selling."    Jesus  of  Sirach. 


The  Distribution  of  Income  283 

dawn  of  this  struggle  even  in  undifferentiated  income,  where 
the  usurers,  who  are  monopoHsts  of  the  capital  available  on 
loan,  victimise  the  poorer  members  of  the  primitive  communi- 
ties and  of  the  medieval  craft-guilds.  Credital  monopoly, 
however,  becomes  far  more  powerful  in  differentiated  income. 
As  long  ago  as  twenty-three  centuries  B.C.,  there  attain  to 
enormous  power  among  the  Chaldeans,  "  those  intriguers  who 
possess  such  a  wonderful  knowledge  of  how  to  make  money 
productive,  and  of  how,  with  loans  at  interest,  with  mortgages, 
with  trading  advances,  with  transmutations  of  values,  and  by 
means  of  their  acquaintance  with  the  markets,  to  carry  on  the 
fight  for  wealth  by  strewing  the  field  with  the  bodies  of  their 
victims. "1  In  the  Middle  Ages,  credital  monopoly  is  a  powerful 
weapon  of  burgher  income  to  the  disadvantage  of  feudal 
income  :  whilst  to-day,  loans  on  mortgage,  practised  on  the 
large  scale  by  the  great  credit  institutions,  enfeeble  income 
derived  from  the  land  ;  and  advances  on  bills,  as  made 
by  the  private  monopolists  of  credit,  constitute  a  potent 
influence  in  effecting  the  failure  of  the  small  producers. 
Meanwhile  the  great  banking  interest  endeavours  to  raise  the 
price  of  the  shares  which  it  issues  to  a  figure  which  is  ruinous 
to  the  buyers.  Even  if  in  such  manipulations  we  have  in  great 
part  to  do  with  trickery  and  fraud,  it  is  none  the  less  true  that 
they  are  able  to  take  place  mainly  owing  to  the  tyrannical 
monopoly  which  the  great  banking  interest  enjoys  in  the  issue 
of  shares.  Finally,  the  fusions  and  alliances  between  the  banks, 
the  struggle  for  the  privilege  of  issuing  bank-notes,  the  entire 
mechanism  of  more  or  less  disguised  loans,  with  which  in  our 
own  days  the  relationships  between  the  banks  and  the  joint- 
stock  companies  are  interwoven,  are,  taken  all  in  all,  so  many 
different  manifestations  of  the  struggle  between  incomes  as 
carried  on  by  means  of  credital  monopoly.  2 

Thus  producers  with  producers,  sellers  with  buyers,  creditors 
with  debtors,  wage  a  savage  and  unceasing  warfare.    Thus 

*  Revillout,  La  creance,  etc.,  pp.  240-1. 

2  In  England,  for  example,  it  often  happens  that  when  a  company  has 
need  of  capital,  another  company  (for  a  suitable  consideration)  undertakes 
to  buy  all  the  products  of  the  first,  which  is  thus  exempted  from  the  need  of 
procuring  the  capital  for  current  expenses  which  would  have  been  required 
had  it  been  necessary  to  wait  some  time  before  the  sale  of  the  commodities 
could  have  been  effected.  Substantially,  we  have  here  a  loan  of  capital  made 
by  the  second  company  to  the  first  in  virtue  of  which  a  part  of  the  income  of 


284  The  Economic  Synthesis 

each  individual  income  is  unable  to  develop  or  to  live 
except  by  attacking  rival  incomes,  and  by  the  forcible 
annexation  of  these,  wholly  or  in  part,  to  its  own  domain. 
Thus,  finally,  the  limit  imposed  by  the  coercion  to  the  associa- 
tion of  labour  upon  the  productivity  of  that  labour  and  upon 
income,  imposes  upon  individual  incomes  an  inevitable  and 
perennial  struggle,  so  that  beneath  the  unruffled  surface  of 
the  economic  system  there  ever  germinates  war  and  universal 
carnage. 

This  struggle  constitutes  the  very  essence  of  society  and  of 
history,  and  thus  affords  a  new  and  interesting  contrast 
between  the  human  species  and  the  lower  orders  of  life. 
Whereas  among  the  lower  animals,  whose  subsistence  is 
gratuitous,  and  therefore  insusceptible  of  increase,  and 
normally  deficient  in  respect  of  the  totahty  of  coexistent  beings, 
the  struggle  is  essentially  a  struggle  for  subsistence — in  the 
case  of  human  beings  among  whom  subsistence  is  artificially 
produced,  and  therefore  susceptible  of  increase,  and  normally 
sufficient  for  the  totality  of  the  population,  the  struggle  for 
subsistence  appears  only  in  critical  periods  of  abnormal 
deficiency,  whilst  the  normal  and  constant  struggle  is  the 
struggle  for  income  in  its  two  essential  manifestations  of  the 
struggle  between  subsistence  and  income  and  the  struggle 
between  incomes.^ 

The  intensity  of  the  struggle  between  incomes  is  not  uniform, 
but  presents  infinite  gradations  in  accordance  with  differences 
in  the  form,  the  kind,  the  degree,  and  the  integral  quantity  of 
income.  In  the  first  place,  it  follows  from  the  previous  observa- 
tions that  the  struggle  between  incomes  is  far  less  intense  in  the 
case  of  undifferentiated  income  than  in  the  case  of  differentiated 
income,  because  in  the  former  there  is  less  quantitative  dis- 
parity between  the  individual  incomes,  because  individual 
saving  is  restricted,  etc.  But  the  intensity  of  the  struggle 
between  incomes  varies  also  in  the  different  sub-forms  of 

the  one  is  surrendered  to  the  other.  This  transference  of  income  is  greater  in 
proportion  to  the  urgency  of  the  need  for  capital  on  the  part  of  the  first 
company,  and  in  proportion  to  the  difficulty  of  procuring  that  capital  else- 
where ;  in  other  words,  it  is  directly  proportional  to  the  intensity  of  the 
credital  monopoly  possessed  by  the  lending  company. 

1  "  The  history  of  the  human  race  revolves  around  the  struggle  for  income." 
Michlachewski,  loc.  cit. 


The  Distribiitio77  of  Inco7ne  285 

undifferentiated  or  differentiated  income,  in  consequence  of 
differences  in  the  efficiency  of  the  various  methods  of  struggle, 
and  in  the  potency  of  their  development. 

The  struggle  between  incomes  is  more  or  less  intense  in 
accordance  with  variations  in  the  kind  of  income.  We  have 
already  had  occasion  to  insist  upon  the  essential  distinction 
between  fluctuating  incomes,  unceasingly  engaged  in  struggles 
and  predatory  enterprise,  and  consolidated  incomes,  whose 
characteristics  are  comparatively  stable  and  peaceful.  The 
struggle  between  incomes  of  the  former  kind  is  naturally  more 
intense  than  the  struggle  between  incomes  of  the  latter  kind  ; 
hence  it  follows  that  when  fluctuating  incomes  undergo  ex- 
pansion at  the  expense  of  consolidated  incomes — ^when,  for 
example,  industrial  profit  increases  to  the  detriment  of  urban 
rent  or  of  the  interest  on  public  debt — there  necessarily  results 
an  increased  ferocity  in  the  struggle  between  incomes.  Again, 
given  a  number  of  incomes,  or  a  number  of  coexistent  forms 
or  degrees  of  income,  exhibiting  a  different  qualitative  com- 
position, those  wherein  fluctuating  income  predominates  will 
exhibit  a  more  intense  and  more  ardent  pugnacity.  The  same 
may  be  said  of  those  kinds  of  income  in  which  fluctuating  in- 
come predominates. 

The  varying  intensity  of  the  struggle  between  incomes  in  the 
different  industries  is  further  interconnected  with  the  character- 
istics assumed  by  the  struggle  between  incomes,  characteristics 
which  render  it  more  or  less  adaptable  to  varying  spheres  of 
production.  When,  as  in  our  own  days,  the  struggle  between 
incomes  is  waged  chiefly  by  the  methods  of  monopoly,  it  is 
per  se  less  applicable  to  those  industries  wherein,  from  their 
very  nature,  monopoly  is  more  difficult  of  attainment.  Hence 
it  seems  that  agriculture,  in  which  monopoly  is  comparatively 
difficult,  should  suffer  far  less  than  other  industries  from  the 
struggle  between  incomes.^  This  can  be  said  of  to-day  only, 
however,  for  in  the  earlier  forms  of  income,  in  which  the  struggle 
between  incomes  was  waged  by  the  very  different  methods  of 
violence  and  fraud,  this  struggle  was  violent  and  terrible  in  the 
case  of  rural  industry  likewise,  as  we  see  exemplified  in  the 
fierce  contests  between  the  Latin  landowners,  or  between  the 

*  Schmoller,  Qrundriaa^  p.  506 ;  Tarde,  Paychologie  iconomique,  II,  p.  82. 


286  The  Economic  Synthesis 

medieval  feudatories.  Moreover,  even  in  modern  times,  the 
comparatively  slight  intensity  of  the  struggle  between  agri- 
cultural incomes  is  a  phenomenon  restricted  to  normal  or 
ascendent  periods  of  income,  for  in  declining  periods  there  is 
a  fierce  struggle  even  among  agrarian  incomes  ;  this  is 
exemplified  by  the  typical  events  during  the  enclosure  of  the 
lands  in  Great  Britain,  and  of  the  savage  struggle  between  the 
larger  and  the  smaller  landed  proprietors  during  periods  of 
crisis.  Finally,  that  kind  of  agricultural  property  which  is 
least  affected  by  the  struggle  between  incomes,  is  the  stable 
and  secure  property  of  the  individual  who  administers  his  own 
land,  or  who  buys  land  with  the  definite  intention  of  employing 
his  own  capital  in  its  development,  as  contrasted  with  the 
speculator  who  buys  land  simply  in  order  to  resell  it  ;  whereas 
the  income  of  the  land-speculator  is  fluctuating  income, 
like  all  income  from  unproductive  capital,  and  is  therefore 
in  the  thick  of  the  struggle  whereby  is  effected  enrichment 
at  others'  expense.  Hence,  also,  monopoly,  though  less 
intense  in  the  case  of  agrarian  property,  manifests  itself 
with  conspicuous  potency  in  the  case  of  urban  property, 
which  is  more  readily  the  object  of  speculation ;  this  is 
plainly  evidenced  by  the  incessant  struggle,  always  founded 
on  monopoly,  carried  on  between  the  owners  of  building 
land  and  the  speculators,  and  between  these  latter  and  the 
builders. 

Nor  is  this  enough  ;  for,  in  addition,  the  struggle  between 
incomes  is  more  or  less  intense  in  accordance  with  variations 
in  the  local  source  of  the  incomes  themselves,  or  according  as 
(whether  industrial  or  agrarian)  they  are  situated  or  received 
in  the  country  or  in  the  town.  It  is  certain  that  an  income 
received  in  the  turbulent  environment  of  the  town  presents,  if 
for  this  reason  alone,  a  greater  pugnacity  ;  and  therefore  there 
is  no  reason  to  wonder  that  incomes  of  the  same  kind  struggle 
one  with  another  more  vigorously  in  the  urban  environment 
than  in  that  of  the  country.  On  the  other  hand,  it  is  no  less 
true  that  the  incomes  which  generally  find  their  way  to  the 
town  are  the  larger  incomes,  or,  it  may  be  said,  consolidated 
incomes  ;  hence  in  this  respect  the  intensity  of  the  struggle 
between  incomes  must  be  less  in  the  town  than  in  the  country. 
The  result  will  be  a  greater  intensity  in  the  struggle  between 


The  Distribtition  of  Income  287 

incomes  in  the  town  or  in  the  country,  varying  according  as 
one  or  the  other  of  these  influences  preponderates. 

The  intensity  of  the  struggle  between  incomes  differs  also 
in  accordance  with  differences  in  their  degree.  It  is,  in  fact, 
true  that  the  struggle  between  incomes  is  an  outcome  of  the 
limitation  of  income  dependent  upon  the  coercion  to  the 
association  of  labour,  and  that  for  this  reason,  as  we  shall  see 
shortly,  it  is,  in  every  form  of  income,  less  intense  when  the 
total  income  is  greater.  But  it  is  also  true  that  among  a 
number  of  individual  incomes  which  are  all  restricted  by  the 
influences  dependent  upon  the  coercion  to  the  association  of 
labour,  and  are  therefore  impelled  to  enrich  themselves  at  one 
another's  expense,  the  incomes  of  high  degree  are  in  a  position, 
by  the  very  fact  of  their  superority,  to  employ  more  potent 
means  of  struggle,  and  therefore  present  greater  pugnacity, 
which  renders  them  more  capable  of  increasing  at  the  expense 
of  lesser  incomes,  just  as  they  themselves  in  their  turn  are 
exposed  to  mutilation  in  consequence  of  the  victorious  aggres- 
sion of  a  still  larger  income.  Supposing  then,  first  of  all,  that 
the  struggle  is  waged  exclusively  between  incomes  of  the  same 
degree,  it  is  certain  that  the  struggle  between  incomes  of  a 
higher  degree  should  present  a  greater  intensity  as  compared 
with  that  which  takes  place  between  incomes  of  a  lower  degree.^ 
But  the  struggle  is  waged  also  between  incomes  of  different 
degrees.  Now,  the  larger  the  absolute  entity  of  the  greater  in- 
come, the  fiercer  is  the  attack  upon  the  lesser  income,  and  there- 
fore the  more  acute  is  the  struggle  between  the  two  ;  the  greater 
the  excess  of  the  larger  income  over  the  lesser,  the  fiercer  also 
is  the  attack  of  the  former  upon  the  latter,  and  the  more 
severe  therefore  is  the  warfare  between  the  two.  It  follows 
that  the  intensity  of  the  struggle  between  two  incomes  of 
different  degrees  is  greater  in  proportion  as  is  greater  the 
absolute  entity  of  the  income  of  the  higher  degree  (since  this 
exhibits  a  proportionally  greater  pugnacity),  and  in  proportion 
as  is  greater  the  excess  of  the  larger  income  over  the  lesser 

^  "  Competition  (or  the  struggle  between  incomes)  is  more  lively  in  pro- 
portion as  the  concentration  of  the  enterprises  is  more  considerable."  "Revue 
economique  internationale,"  Sept.,  1904,  p.  159. — Baker  {loc.  ciL,  pp. 
250-3)  also  writes  :  "  The  intensity  of  competition  tends  to  vary  directly  in 
proportion  to  the  amount  of  capital  required  for  the  operation  of  each  com- 
peting imit." 


288  The  Economic  Synthesis 

(since  the  struggle  is  likely  to  be  proportionally  more  severe) ; 
in  other  words,  the  intensity  of  the  struggle  between  incomes 
of  different  degrees  is  directly  proportional  to  the  entity  of  the 
greater  income  and  to  its  excess  over  the  lesser  income.^ 
Hence,  given  a  series  of  incomes  of  diminishing  degree,  the 
mean  intensity  of  the  struggle  between  two  incomes  of  dijfferent 
degrees  is  equal  to  the  mean  between  the  intensity  of  the 
struggle  between  the  maximum  and  the  minimum  incomes  and 
the  mean  income  ;  whilst  the  struggle  between  the  maximum 
income  and  the  various  incomes  as  we  descend  in  the  scale 
exhibits  an  ever-increasing  intensity,  to  attain  a  maximum 
intensity  in  the  case  of  the  struggle  between  the  maximum 
income  and  the  minimum.  Thus,  therefore,  the  greater  the 
divergence  between  the  maximum  income  and  those  lower 
in  the  scale,  the  greater  is  the  mean  intensity  and  the  greater 
is  the  maximum  intensity  of  the  struggle  between  the  incomes. 
This  result  may,  however,  be  modified  by  two  series  of 
circumstances.  In  the  first  place,  there  are  certain  degrees  of 
income,  neither  extremely  high  nor  extremely  low,  which 
exhibit,  on  the  one  hand,  a  limited  pugnacity,  and,  on  the  other 
hand,  are  capable  of  resisting  aggressions  on  the  part  of  other 
incomes,  or  even  of  warding  off  such  aggressions.  Such  in- 
comes realise  in  the  best  way  possible  the  ancient  precept 
of  Aristotle  :  not  to  be  so  rich  as  to  arouse  the  covetousness 
of  the  stronger,  nor  so  poor  as  to  be  unable  to  resist  aggressions. 
Whilst,  therefore,  the  extremely  large  and  the  extremely  small 
incomes  are  ever  in  a  condition  of  unstable  equilibrium,  in- 
cessantly exposed  to  unforeseen  increase  or  to  sudden  decline, 
the  incomes  of  a  moderate  degree  are  by  nature  endowed  with 
a  comparatively  stable  equilibrium.  And  there  exists,  or  may 
exist,  a  degree  of  income  which  is  perfectly  successful  in 
escaping  from  the  battle  between  the  incomes  and  from  its 
injurious  consequences — an  income,  that  is  to  say,  whose 
condition  approximates  to  that  of  stable  equilibrium.  Thus, 
therefore,  in  addition  to  the  distinction  previously  mentioned 
between  fluctuating  and  consolidated  incomes,  participating 

*  Similarly,  the  intensity  with  which  is  perceived  the  difference  between 
two  tones  depends  not  only  upon  the  absolute  entity  of  that  difference,  but 
also  on  the  entity  of  the  respective  tones  (Fechner,  Psychophysik,  Leipzig,  1 860, 
p.  48). 


The  Distribution  of  Income  289 

in  varjdng  degrees  in  the  struggle  between  incomes,  there  is 
now  to  be  indicated  the  distinction  between  the  stablt  and  the 
unstable  incomes,  the  latter  participating  in  the  struggle  from 
which  the  former  are  altogether  exempt. — Here  it  must  be 
pointed  out  that  the  very  existence  of  stable  incomes  which 
do  not  participate  in  the  struggle  between  incomes,  su£&ces 
per  se  to  prove  that  this  struggle  is  not  an  eternal  phenomenon 
or  one  inseparable  from  human  social  life,  but  is  an  essentially 
contingent  phenomenon  arising  out  of  the  conditions  under 
which  income  has  hitherto  prevailed,  and  one  which  may 
perfectly  well  be  dispensed  with  in  a  superior  economic  form. — 
However  this  may  be,  confining  ourselves  to  the  subject  of  the 
present  argument,  it  results  from  the  existence  of  stable  in- 
comes that  the  struggle  between  incomes  is  no  longer  in  every 
case  directly  proportional  to  their  entity  ;  for,  in  the  sphere  of 
stable  incomes,  the  struggle  between  incomes  is  less  intense  than 
that  which  obtains  among  the  lesser  incomes,  and  is,  indeed, 
normally  non-existent. 

A  second  and  no  less  striking  exception  to  the  principle 
here  considered  is  created  by  combination  between  incomes. 
In  the  first  place,  such  combination  succeeds,  as  a  rule,  in 
suppressing  the  struggle  between  the  combined  incomes, ^  and 
in  the  second  place  it  reinforces  them  against  the  attack 
of  greater  incomes  ;  so  that  in  this  respect  the  combined 
income  assumes  the  aspect  of  a  stable  income.  On  the  other 
hand,  the  combination  raises  the  combined  incomes  into  a 
higher  sphere,  and  therewith  renders  them  more  aggressive 
against  the  incomes  lower  down  in  the  scale  ;  thus,  therefore, 
the  struggle  between  combined  incomes  of  a  given  degree  and 
those  lower  in  the  scale  may  be  more  intense  than  the  struggle 
between  uncombined  incomes  of  a  superior  degree  or  than  that 
between  these  and  those  immediately  beneath  them  in  the  scale. 

The  struggle  between  incomes  also  varies  in  intensity  in 
accordance  with  variations  in  the  total  quantity  of  income. — 
In  this  connexion,  however,  it  is  necessary  to  refer  to  two 

*  The  possibility  is  certainly  not  excluded  that  struggle  may  continue** 
between  the  combined  incomes.  Thus,  in  Germany,  the  cartels  consisting  of 
large  and  of  small  producers  are  the  arena  of  incessant  contests  between  the 
former  and  the  latter.  It  must,  however,  be  im.derstood  that  the  intensity  of 
this  struggle  is  always  less  than  would  be  the  case  if  the  combination  had  not 
taken  place. 


290  The  Economic  Synthesis 

contradictory  influences.  First  of  all,  it  is  certain  that  the 
greater  the  total  quantity  of  income  relatively  to  the  popula- 
tion, the  greater  is,  ceteris  paribus,  the  absolute  entity  of  the 
incomes  of  higher  degree,  and  the  greater  is  the  excess  of  these 
over  the  incomes  of  lower  degree,  and  hence  the  greater  is  the 
intensity  of  the  struggle  between  the  incomes  of  a  high  degree, 
and  the  normal  intensity  of  the  struggle  between  the  incomes 
last-named  and  the  incomes  of  lesser  degree.  It  must  be 
added  that,  in  proportion  as  the  total  income  is  high  and  as  the 
conditions  of  the  economy  are  more  prosperous,  do  we  find  that 
the  greater  incomes  are  better  able  to  make  use  of  the  advan- 
tages conferred  upon  them  by  their  size,  by  the  introduction 
of  more  perfect  technical  appUances,  by  the  formation  of  joint- 
stock  companies,  by  the  constitution  of  powerful  combines, 
and  by  the  undertaking  of  more  lucrative  speculations.  In 
this  respect,  also,  the  struggle  must  necessarily  be  rendered 
more  acute.  In  the  second  place,  it  is  equally  true  that  the 
greater  the  total  income,  the  greater  also  is,  on  the  one  hand, 
the  prevalence  of  consolidated  incomes,  comparatively  exempt 
from  the  battle  between  the  incomes,  and  the  less,  on  the  other 
hand,  is  the  need  of  the  recipients  of  income,  and  the  slighter 
therefore  is  the  impulse  which  urges  them  to  round  off  their 
incomes  by  annexing  the  incomes  of  others.  Hence  increase 
of  income,  if,  by  a  purely  mathematical  influence,  it  tends  to 
accentuate  the  struggle  between  incomes,  yet  tends  to  attenuate 
that  struggle  thanks  to  a  psychological  influence,  due  to  the 
prosperity  which  the  increase  of  income  brings  to  the  recipients 
of  income  ;  and  according  as  there  preponderates  one  influence 
or  the  other,  will  there  be  an  accentuation  or  a  diminution  in 
the  intensity  of  the  struggle  between  incomes. 

As  a  rule  the  psychological  influence  so  far  preponderates 
over  the  purely  mechanical  or  arithmetical  influence,  that  the 
periods  of  expansion  of  income  are  universally  characterised 
by  an  attenuation  of  the  struggle  between  incomes,  and  the 
periods  of  decHne  by  an  inevitable  exasperation  of  that 
struggle.  This  is  a  fact  to  which  the  writer  has  had  occasion  to 
•  refer  in  an  earlier  work,  though  it  was  there  considered  exclu- 
sively in  relation  to  the  profit  of  capital.  ^    He  pointed  out  that 

*  Analisi,  I,  pp.  609,  et  aeq. 


The  Distribtition  of  Income  291 

the  intensity  of  redistribution,  that  is  to  say,  of  the  struggle 
between  profit  and  the  other  kinds  of  income,  is  in  inverse 
ratio  to  the  intensity  of  distribution,  or  of  the  struggle  between 
profit  and  wages,  or  of  the  possibility  of  the  former  to  increase 
at  the  expense  of  the  latter,  that  is  to  say,  in  more  general  terms, 
in  inverse  ratio  to  the  quantity  of  profit.  But  all  this  is  yet 
more  true  in  relation  to  the  total  income  ;  for  the  decline  of  a 
given  kind  of  income  may  be  compensated  for  its  owner  by  a 
dilatation  in  income  of  some  other  kind,  whereas  the  diminution 
of  total  income  is  always  irreparable,  and  can  be  compensated 
only  by  means  of  the  annexation  of  income  from  another, 
that  is  to  say,  by  means  of  the  struggle  between  incomes. 
This  is  why  the  intensity  of  the  struggle  between  incomes 
exhibits  a  rhythmical  decline  or  ascent  in  proportion  as  the 
figure  of  income  increases  or  diminishes. 

Thus,  in  the  United  States,  the  plan  for  an  amalgamation 
between  the  Reading  Railroad  and  its  rivals,  brought  forward 
for  the  first  time  in  the  year  1892  (a  period  of  commercial 
decline),  is  altogether  unsuccessful ;  there  results  the  failure 
of  the  first-named  company,  and  it  becomes  necessary  for  the 
other  companies  to  engage  in  a  furious  struggle  by  means  of 
lowering  their  rates,  in  order  to  resist  the  competition  of  the 
bankrupt  company,  which  no  longer  requires  to  earn  any 
interest  for  its  shares.  But  as  soon  as  economic  prosperity 
returns,  the  intensity  of  the  struggle  between  the  railway 
companies  diminishes,  until  in  the  years  1900-1901,  with  the 
decisive  improvement  in  the  conditions  of  the  market,  the 
amalgamation  planned  ten  years  before  is  at  length  effected 
by  the  instrumentality  of  Morgan.  ^  Here,  the  increase  of 
income  has  attenuated  the  struggle  between  incomes. — 
Conversely,  during  the  decadence  of  Rome,  the  progressive 
decline  in  social  income  makes  it  impossible  for  the  proprietors 
to  enrich  themselves  by  the  systematic  spoliation  of  the  pro- 
vinces, and  there  arise  those  fratricidal  struggles  which  lead 
Salvianus  to  exclaim  :  Omnes  poene  Romani  se  mutuo  per- 
sequuntur  !  Similarly  in  medieval  Germany,  as  soon  as  the 
decline  in  wealth  forcibly  restricts  the  possibilities  of  rapine 
on  the  part  of  the  feudal  seigneurs,  these  turn  fiercely  upon 

*  Asliley,  The  Adjustment  of  Wages,  London,  1903,  p.  123. 


292  The  Economic  Synthesis 

the  smaller  landowners  and  vassals,  to  annex  by  force  the  in- 
comes of  these.  1  It  is  the  same  in  1846,  when  the  decline  in 
income  gives  rise  to  the  agrarian  evictions  in  Ireland  ;  and 
everywhere  the  struggle  between  the  greater  industry  and  the 
lesser  assumes  the  most  sinister  forms  during  the  periods  of 
decHne  of  income,  as  is  proved  by  the  history  of  the  ruin  of  the 
hand-loom  weavers  in  England  and  in  India. — Here  it  may  be 
pointed  out  that  in  these  periods  of  decline  the  struggle  between 
incomes  assumes  violent  characteristics  unknown  to  the 
normal  periods  of  income — as  far,  that  is  to  say,  as  the  income 
of  the  wage-system  is  concerned — ^and  in  any  case  the  struggle 
is  more  violent  than  during  normal  periods. 

But  even  in  the  normal  periods  of  an  economy,  the  decHne 
of  income  always  has  the  effect  of  exasperating  the  struggle 
between  incomes.  Thus  to-day  usury,  that  primitive  form  of 
struggle  between  incomes,  flourishes  especially  in  poorer 
countries  ;  and  above  all  in  that  land  which  is  the  poorest  of  aU, 
in  Sardinia,  where  the  syndic,  the  lawyer,  and  the  parish  priest 
all  practise  usury  with  wicked  voracity.  2  In  Germany,  again, 
after  1879,  as  soon  as  the  triumph  of  protection  has  led  to  the 
sterilisation  of  so  many  of  the  productive  forces,  and  has  there- 
with reduced  the  mass  of  income,  there  occurs  a  series  of  violent 
contests,  not  only  in  manufacturing  industry,  but  even  in 
agriculture.^  In  more  general  terms,  of  two  regions  or  two 
towns,  in  which  the  intensity  of  production  and  of  trade  differs, 
giving  rise  to  correlative  differences  in  the  amount  of  the 
average  income,  that  region  or  town  in  which  the  average 
income  is  lower  always  exhibits  a  fiercer  struggle  between  in- 
comes.— ^In  Italy  we  have  an  eloquent  example  of  this  in  the 
well-known  fact  that  litigiousness  is  far  more  general  in  the 
southern  and  central  regions  where  the  volume  of  business  and 
wealth  are  smaller. — ^A  yet  more  evident  proof  is  afforded  by 
the  contrast  between  Turin  and  two  other  towns  in  so  many 
respects  similar,  namely  Milan  and  Genoa. — ^It  is  certain  that 
the  tunnels  recently  pierced  through  the  Alps,  and  the  new 
direction  taken  by  international  traffic,  have  furnished  to  Milan 

^  Lamprecht,  Deutsche  Geschichte,  V,  I,  pp.  79,  et  aeq. 

2  Chessa,  DelV  uaura  e  delle  sue  forme  nella  provincia  di  Saaaari,  Rome,  1906, 
pp.  29-30,  33,  53,  et  seq. 

*  Cohn,  Economic  Journal,  1904,  p.  193. 


The  Distribution  of  Income  293 

and  to  Genoa  conditions  singularly  propitious  for  the  produc- 
tion and  increase  of  income,  but  that  Turin,  on  the  other  hand, 
has  been  injuriously  affected  by  the  same  changes.  It  results 
from  this  that  the  quantity  of  income  relatively  to  the  popula- 
tion is  necessarily  declining  in  Turin,  in  contrast  to  what  is 
happening  in  Milan  and  Genoa  ;  hence  the  struggle  between 
incomes,  or  the  forces  by  means  of  which  the  individual 
incomes  tend  to  enrich  themselves  at  the  expense  of  rival  in- 
comes, must  display  themselves  with  much  greater  intensity 
in  the  sub- Alpine  metropolis.  This  is  what  actually  happens, 
and  the  insane  speculations  which  give  rise  in  Turin  to  terrible 
and  repeated  explosions,  with  disastrous  sequels  in  the  form  of 
bankruptcies  and  catastrophes,  are  the  inevitable  result  of  a 
struggle  between  incomes  attaining  in  this  city  an  abnormal 
intensity  under  the  inexorable  stimulus  of  too  slow  an  increase 
in  income. 

Finally  the  intensity  of  the  struggle  between  incomes  varies 
in  direct  ratio  with  the  number  of  the  recipients  of  income  ; 
inasmuch  as  the  larger  this  number  is,  the  more  frequent  are 
contacts  between  them,  and  more  frequent  therefore  the 
motives  and  the  occasions  for  conflict.^  Since  the  number  of 
the  recipients  of  income  is,  ceteris  paribus,  directly  proportional 
to  the  density  of  the  population,  it  follows  that  the  struggle 
between  incomes  tends  to  increase  in  intensity  as  the  population 
increases,  even  when  this  increase  is  accompanied  by  a  correla- 
tive increase  in  production  and  in  capital. 

Such  being  the  factors  upon  which  the  intensity  of  the 
struggle  between  incomes  directly  depends,  it  will  be  obvious 
that  all  those  institutions  which  accentuate  or  attenuate  these 
factors  exercise  an  indirect  influence  in  increasing  or  diminish- 
ing the  struggle  between  incomes.  Law,  in  so  far  as  it  accen- 
tuates fraud,  violence,  or  monopoly,  powerfully  intensifies  the 

^  Baker  is  of  a  contrary  opinion  {loc.  cit. ) :  for  he  contends  that  the  intensity 
of  the  struggle  between  incomes  is  inversely  proportional  to  the  number  of 
firms,  since  the  greater  this  number,  the  less  is  the  effect  produced  by  the 
appearance  of  a  new  entrepreneur  in  the  arena.  Although  it  must  be  admitted 
that  there  is  much  truth  in  this  observation,  it  cannot  be  denied  that  the 
struggle  must  be  more  active  in  proportion  as  the  combatants  are  more 
numerous.  Thus  it  is  a  fact  that  the  proportion  of  incomes  destroyed  is 
greatest  in  the  case  of  those  kinds  of  enterprise  in  which  the  number  of  the 
recipients  of  income  is  largest,  as,  for  example,  in  the  case  of  those  engaged 
in  small  retail  trade  ;  thus  in  England  it  is  estimated  that  every  year  ao 
less  than  960  grocers  auccumb  (Macrosty,  loo,  cU.,  p.  244). 


294  The  Economic  Synthesis 

struggle ;  but  in  so  far  as  it  attenuates  these  factors,  it  mitigates 
the  struggle.  All  the  institutions  which  diminish  the  greater 
incomes,  attenuate  the  intensity  of  the  struggle  between  the 
greater  incomes,  as  well  as  the  normal  intensity  of  the  struggle 
between  incomes  of  different  degrees  ;  this  is  therefore  the 
effect  to  be  anticipated  from  graduated  taxation,  and  also 
from  the  conversion  of  national  debt  which  affects  to  a  greater 
extent  the  larger  incomes,  those  which  especially  take  the 
consohdated  form. — ^The  aboHtion  of  entail,  by  overthrowing  a 
formidable  bulwark  of  the  greater  incomes,  and  by  permitting 
the  subdivision  of  these,  also  attenuates  their  superiority  to 
others,  and  therewith  diminishes  the  intensity  of  the  struggle 
between  incomes.  The  same  effect  will  be  produced  by  those 
institutions  that  reinforce  or  increase  the  minor  incomes. 
Thus,  all  the  laws  which  aim  at  the  organisation  of  the  lesser 
crafts,  or  at  preserving  them  from  the  onslaught  of  concen- 
trated industry  ;  all  the  institutions,  such  as  the  agrarian  laws 
of  Rome,  Irish  land-legislation,  the  Homestead  Law  of  the 
United  States,  which  aim  at  the  protection  of  the  small  farmer 
from  the  onslaughts  of  the  great  estates  ;  all  the  provisions 
aiming  at  the  diffusion  of  technical  instruction,  and  at  the 
provision  of  credit  at  low  rates  of  interest  to  small  pro- 
prietors, independent  artisans,  small  traders,  or  co-operative 
societies  ;  the  demand  from  an  artisan  who  wishes  to  exercise 
a  craft  on  his  own  account  that  he  shall  furnish  proof  of 
capacity  ;  the  prohibition,  made  by  the  Claudian  Law  (218 
B.C.)  of  the  practice  of  wholesale  trading  by  Roman  senators 
or  their  children  ;  the  legal  exclusion  of  these  from  public 
enterprises  ;  the  prohibition  (of  which  we  have  an  example  in 
Austria)  of  the  undertaking  on  the  part  of  great  industry  of 
work  not  properly  appertaining  to  the  particular  kinds  of 
production  upon  which  the  respective  industries  are  engaged  ; 
the  prohibition  (as  by  the  city  of  Hanover)  of  the  utilisation 
by  the  great  shops  of  the  upper  storeys  of  their  buildings  for  the 
sale  of  their  goods  ;  the  prohibition  (North  Carolina,  1889)  of 
the  sale  of  commodities  below  cost  ;  the  prohibition  of  retail 
trading  by  great  aggregations  of  capital ;  laws  against 
capitahst  combines,  speculation,  or  joint-stock  companies  ;  laws 
to  prevent  "  corners " ;  the  fixing  of  prices  by  collective 
bargains ;    increased    taxation   of   the  profits  of    the    great 


The  Distribution  of  Income  295 

shops — in  a  word,  all  legislative  provisions  constituting 
what  may  be  called  the  policy  of  the  middle  classes^ — 
effect,  or  aim  at  effecting,  a  diminution  in  the  economic 
superiority  of  the  greater  incomes,  and  therewith  a  diminu- 
tion in  the  intensity  of  the  struggle  between  incomes  of 
varying  degrees.  PubHc  registration  of  the  transference 
of  land,  by  rendering  it  possible  for  the  less  well-to-do  to 
buy  land,  would  tend  'per  se  to  increase  the  number  of 
lesser  incomes  or  to  slacken  the  concentration  of  income, 
and  therefore  to  diminish  the  intensity  of  the  struggle 
between  incomes ;  unless,  conversely,  by  favouring  specula- 
tion in  land  it  should  exercise  the  opposite  influence,  destroy- 
ing the  lesser  incomes  and  exasperating  the  battle  between 
incomes. 2  But,  apart  from  written  law,  institutions  re- 
sulting from  individual  initiative  are  able  to  change  the 
relative  power  of  the  recipients  of  income.  Thus,  all  the 
technical  innovations  which  render  mechanical  power  ac- 
cessible to  minor  industry  ;  associations  (such  as,  for  in- 
stance, the  Artel  among  the  resin-refiners  in  Russia)  formed 
by  small  producers  ;  the  confederations  among  small  pro- 
prietors for  the  purchase  of  raw  materials  and  the  sale 
of  products  ;  agreements  (such  as  that  recently  formed 
in  Hanover)  by  which  small  federated  manufacturers  bind 
themselves  to  buy  exclusively  the  products  of  their  own 
members — all  tend  to  reinforce  the  small  producers,  and  to 
diminish  the  struggle  between  incomes  of  various  degrees. 
Insurance,  from  the  most  archaic  form  of  a  gamble  on  the 
fall  of  public  securities  (in  order  to  compensate  the  specu- 
lator should  the  undertaking  he  is  engaged  upon  turn  out 
badly  from  some  poHtical  cause),  to  that  most  highly  developed 
and  modern  form  of  the  time-bargain — ^insurance,  I  say,  where 
accessible  to  the  lesser  incomes,  serves  to  protract  a  threat- 
ened existence,  to  defer  absorption  by  the  larger  incomes,  to 
lessen  the  amount  and  the  sovereign  power  of  these  latter, 

1  Wernicke,  Kapitalisimis  und  Mitteletandpolitik,  Jena,  1907,  pp.  385, 
470,  et  acq.,  668,  etc.  ;  Philippovich,  De  la  riglementation  de  la  repartition  du 
revenu  par  la  politique  economique,  "  Revue  Econ.  Intern.,"  March,  1907. 
The  Italian  bill  upon  naval  credit  aims  at  assisting  the  less  wealthy  armour- 
plate  manufacturers,  and  is  therefore  resisted  by  the  big  firms. 

*  A.  de  Lavergne,  Les  transmissions  de  la  propri4t6  immohiliere  en  Angle- 
terrcy  Paris,  1905,  p.  241. 


296  The  Economic  Synthesis 

and  therewith  undoubtedly  succeeds  in  limiting  the  intensity 
of  the  struggle  between  incomes.  Finally,  an  analogous  in- 
fluence is  exercised  by  certain  institutions  of  another  kind, 
which  tend  to  preserve  particular  social  classes,  or  to  save 
them  from  possible  ruin.  Thus  the  well-to-do  class,  and  the 
noble  class  in  particular,  has  the  advantage  of  certain  institu- 
tions exercising  an  anodjme  or  masked  kind  of  charity,  secur- 
ing for  the  less  well-to-do  members  of  these  classes  a  perma- 
nent income  which  exempts  them  from  further  participation 
in  the  struggle  between  incomes,  or  from  the  more  disastrous 
consequences  of  the  struggle  previously  waged. ^  In  more 
general  terms,  all  the  institutions  which  diminish  the  quan- 
titative divergence  between  incomes,  whether  by  diminishing 
the  larger  incomes,  or  by  increasing  the  smaller  incomes,  or 
by  both  of  these  methods  at  the  same  time,  necessarily  at- 
tenuate the  intensity  of  the  struggle  between  incomes  ;  whilst 
institutions  acting  in  the  reverse  direction  accentuate,  to  that 
extent,  this  intensity. 

Does  the  struggle  between  incomes  tend  to  become  more 
acute,  or  less,  as  income  evolves  ? — ^In  truth,  if  the  struggle 
between  incomes  is  nothing  more  than  the  corollary  of  the 
restriction  imposed  on  the  productivity  of  associated  labour 
by  the  coercion  which  constrains  it,  it  seems  obvious  that 
this  struggle  must  become  less  severe  in  each  successive  form 
of  income,  since,  as  we  proceed  from  each  form  to  the  next, 
this  coercion  undergoes  (save  for  occasional  exceptions)  a 
progressive  attentuation.  On  the  other  hand,  and  indepen- 
dently of  this,  it  is  in  the  very  nature  of  economic  progress 
that  there  should  ensue  a  continually  increasing  mitigation 
in  the  processes  of  this  struggle — for  the  struggle,  as  we  have 
seen,  from  the  harshness  of  violence  and  of  fraud,  proceeds 
universally  to  the  comparatively  civilised  forms  of  monopoly. 
— Counterposed  to  these  influences,  however,  in  the  succes- 
sive phases  of  income,  is  the  increasing  efficiency  of  the 
technical  and  economic  means  of  struggle,  whereb}^  in  turn 
the  struggle  between  incomes  is  rendered  continually  more 
potent  and  destructive  ;  wliilst  in  the  case  of  income  founded  on 
the  wage-system,  to  render  the  contest  more  disastrous,  there 

^  May,  in  the  "  Jahrbuch  fiir  Gesetzgebung,"  1903,  pp.  914-6. 


The  Distribution  of  Income  297 

ensues  the  snapping  of  all  the  legislative  shackles  which  had 
been  imposed  to  restrict  the  battle  between  incomes  in  earher 
historic  forms. — Meanwhile,  with  the  advancing  evolution  of 
income  there  results  an  increasing  prevalence  of  movable 
wealth,  and  therewith  of  fluctuating  incomes  ;  whilst  there 
is  a  continual  increase  in  the  disparity  between  incomes 
and  in  the  number  of  the  recipients  of  income,  so  that  there 
is  an  ever-increasing  accentuation  of  the  factors  upon  which 
the  intensity  of  the  struggle  between  incomes  depends. — 
From  these  considerations  the  conclusion  is  obvious  that  the 
struggle  between  incomes  must  become  continually  more  in- 
tense with  the  passage  of  income  through  its  successive  forms. 
— Inasmuch,  however,  as  in  the  ascendent  periods  of  each  form 
of  income  there  occurs  an  increase  in  the  total  quantity  of 
income  and  an  expansion  of  consoHdated  incomes  at  the 
expense  of  fluctuating  incomes,  these  being  factors  which 
attenuate  the  intensity  of  the  struggle  between  incomes, 
whereas  during  the  declining  periods  of  each  form  of  income 
the  inverse  phenomena  occur,  it  follows  that  in  each  form  of 
income  the  struggle  between  the  incomes,  while  remaining 
more  intense  than  in  the  preceding  form,  decreases  in  in- 
tensity during  the  ascendent  period,  to  become  progressively 
more  acute  during  the  subsequent  period  of  decline. 

§  2.  Result  of  the  Struggle  Between  Incomes. 
The  Distribution  of  Income. 

(a)  Static  Conditions. 

The  result  of  the  struggle  between  incomes  is,  like  the  result 
of  every  struggle,  the  victory  of  one  income  over  another.  Just 
as  in  war,  however,  it  is  not  the  personal  courage,  but  the 
possession  of  the  best  warhke  instruments,  and  therewith  the 
possession  of  the  greatest  abundance  of  money,  which  decides 
the  victory,  similar  considerations  apply  to  the  struggle  between 
incomes.  In  fact,  the  quantitatively  superior  income  is  placed, 
precisely  on  account  of  its  greater  size,  in  a  more  advantageous 
position  for  the  employment  of  the  various  methods  of  struggle 
previously  described  ;  and  this  fact,  if  most  plainly  manifest 
as  concerns  monopoly,  is  also  extremely  obvious  in  respect  of 


298  The  Economic  Synthesis 

the  other  methods  of  struggle,  namely  violence  and  fraud. 
Thus  it  is  in  the  very  nature  of  things  that  the  struggle  be- 
tween incomes  should  lead  to  the  triumph  of  the  greater 
income.^ 

What,  then,  is  the  actual  outcome  of  the  victory  of  one 
income  over  another  ?  In  the  less  severe  instances  the  result  is 
merely  to  hinder  the  defeated  or  lesser  income  from  enrich- 
ment or  increase  ;  that  is  to  say,  the  victorious  or  larger  in- 
come is  able  to  annex,  to  the  exclusion  of  the  other,  the  general 
increments  of  wealth  and  of  product.  In  such  conditions,  the 
influence  of  the  struggle  between  incomes  is  comparatively 
limited,  inasmuch  as  the  condition  of  the  victorious  incomes 
is  improved  without  any  serious  harm  being  done  to  the  de- 
feated incomes. 

In  many  cases,  however,  the  struggle  between  incomes  has 
precisely  the  opposite  result,  inasmuch  as  it  impoverishes  the 
defeated  or  lesser  incomes  without  enriching  the  victorious 
or  greater  incomes.  Now,  since  this  ruin  of  a  part  of  the  in- 
comes is  the  necessary  outcome  of  the  struggle  between  in- 
comes, which  is  itself  an  inevitable  corollary  of  the  economic 
system  based  upon  the  coercive  association  of  labour,  it  follows 
that  the  inviolabihty  of  property  is  economically  impossible. 

The  consequence  is  that  the  struggle  between  the  income 
founded  upon  associated  labour  and  the  income  founded  upon 
isolated  labour,  in  view  of  the  fact  that  the  latter  is  neces- 
sarily less  fitted  for  warfare,  suppresses  a  part  of  the  repre- 
sentatives of  income  founded  upon  isolated  labour  who  would 
otherwise  have  been  able  to  subsist  ;  that  is  to  say,  the  mass 
of  isolated  labour  producing  income,  and  persistent  because  it 
produces  income,  is  less  than  that  which  would  exist  were 
there  no  struggle  between  incomes. 

As  a  rule,  however,  the  victory  of  one  income  over  another 
leads  to  a  combination  of  the  effects  above  indicated,  depress- 

^  "In  existing  society  the  struggle  for  existence  is  a  struggle  among  the 
best  armed,  that  is,  among  those  who  own  better  machinery,  etc.  But  it  is 
the  manufacturer  who  possesses  the  largest  capital  who  is  able  to  develop  his 
business  on  lines  corresponding  to  the  latest  mechanical  improvements,  who 
can  procure  the  services  of  the  finest  technical  experts,  and  so  on.  The 
struggle  is  in  reality  between  the  capitals  "  (Bonger,  La  criminaliU  et  les 
conditions  economiques,  Amsterdam,  1905,  pp.  343-4). — "  It  is  not  any  form 
of  ability,  whether  directive  or  manual,  which  furnishes  a  greater  reward  in 
industry.    It  is  capital  as  capital."     Chiozza-Money,  loc.  ciU,  p.  97. 


The  Distribution  of  Income  299 

ing  the  defeated  income  into  an  inferior  degree,  and  raising 
the  victorious  income  into  a  superior  degree.  In  Germany  we 
have  a  classical  example  of  this  ;  for  here  the  struggle  between 
banking  incomes  leads  to  the  destruction  of  many  private  banks, 
whilst  the  lesser  joint-stock  banks  group  themselves  more  and 
more  round  stronger  institutions,  until  there  come  into  exis- 
tence three  or  four  banking-suns  around  which  revolve  numer- 
ous minor  satellites.^  In  a  similar  way  there  is  effected  the 
progressive  annexation  of  the  smaller  mining  enterprises  to 
those  of  the  coal  barons.  The  same  phenomenon  now  occurs 
in  the  most  varied  spheres  of  economic  activity,  leading  to  a 
reduction  of  the  lesser  incomes  and  to  a  corresponding  eleva- 
tion of  the  larger. 

Now  whichever  of  the  three  eventuahties  here  indicated 
takes  place,  whether  the  victorious  income  increases,  the 
defeated  income  diminishes,  or  both  these  changes  simul- 
taneously occur,  the  necessary  result  is  in  all  cases  ahke  an 
increase  in  the  quantitative  divergence  between  the  individual 
incomes.  This  gives  rise  to  a  remarkable  repercussion.  We 
have  seen  that  the  increase  in  the  disparity  between  incomes 
increases  the  intensity  of  the  struggle  between  incomes  ;  and 
we  now  see  that  the  struggle  between  incomes  increases  the 
disparity  between  incomes.  It  follows  that  the  struggle  be- 
tween incomes,  by  increasing  the  difference  between  incomes, 
generates  'ptr  se  a  force  tending  to  intensify  that  struggle  ; 
that  is  to  say,  it  tends  to  render  itself  always  more  intense  by 
the  very  effect  of  its  own  consequences. 

This  purely  quantitive  working  of  the  struggle  between  in- 
comes leads,  sooner  or  later,  to  a  marked  qualitative  change. 
From  the  very  fact  that  the  victorious  income  increases  and 
the  vanquished  income  diminishes,  the  struggle  between  in- 
comes tends  to  make  the  victorious  income  differentiated, 
and  the  vanquished  income  undifferentiated.  Nor  is  this  aU. 
Let  us  in  fact  suppose  a  primary  condition  in  which  there  is  a 
declining  series  of  undifferentiated  incomes,  differing  one  from 

^  Schmoller,  Qrundriss,  pp.  695,  et  seq.  ;  Calwer,  Wirtschaftsjahr,  1905, 
p.  258  ;  Schuhmacher,  The  Concentration  of  Oerman  Banking,  "  Political 
Science  Quarterly,"  March,  1907.  The  failure  of  the  Societa  Italiana  di 
Credito  Mobiliare  results  from  a  fierce  struggle  between  banking  incomes, 
and  leads  to  the  enrichment  at  the  expense  of  the  defeated  company  of  not  a 
few  national  institutions. 


300  The  Economic  Synthesis 

another  by  quantities  which,  as  we  know,  must  necessarily 
be  very  slight.  If  now  there  arises  a  struggle  between  the 
incomes,  the  vanquished  incomes  are  thrust  down  into  a  lower 
sphere,  and  the  lowest  incomes  are  forced  into  the  most  de- 
pressed sphere  of  all,  that  of  subsistences.  In  other  words, 
the  capitalist-labourers  of  the  lowest  grade  are  transformed 
into  labourers  pure  and  simple  ;  and,  in  the  non-existence  of 
free  land,  such  remains  their  permanent  condition.  On  the 
other  hand,  the  victorious  incomes,  or  at  least  the  most  for- 
tunate among  these,  are  raised  into  a  superior  sphere  ;  and 
this  elevation  sooner  or  later  enables  these  recipients  of 
income  to  exempt  themselves  from  labour,  so  that  their  un- 
differentiated income  is  transformed  into  differentiated  in- 
come. Hence  the  necessary  result  of  the  struggle  between 
incomes  (when  aided  by  the  suppression  of  free  land)  is  the 
cleavage  of  the  undifferentiated  income  hitherto  existing  into 
two  antagonistic  categories — subsistence  and  differentiated 
income.  This  is  the  actual  way  in  which,  in  prehistoric  times, 
differentiated  income  come  into  existence.  It  is  well  known 
that  in  the  primitive  communist  economy  the  struggle  be- 
tween the  owners  of  incomes  quantitative^  diverse  ends,  on 
the  one  hand,  by  the  expropriation  of  the  poorest  and  their 
transformation  into  slave  labourers,  and,  on  the  other  hand, 
by  the  enrichment  of  the  victors,  who  are  in  this  way  enabled 
to  abandon  labour  and  to  attain  to  the  delights  of  a  respect- 
able inertia.  That  is  to  say  it  is  the  struggle  between  incomes 
which  effects  the  cleavage  of  the  primarily  undifferentiated 
income  into  two  distinct  and  hostile  zones,  that  of  sub- 
sistence and  that  of  differentiated  income*  If  then  we 
learned  in  the  last  chapter  that  mixed  income  is  the 
outcome  of  the  struggle  between  subsistence  and  income, 
we  see  now  that  differentiated  income  and  pure  subsistence 
are,  in  their  turn,  the  outcome  of  the  struggle  between 
incomes  ;  that  is  to  say  that,  in  the  social  arena  no 
less  than  in  the  biological  arena,  struggle  is  the  perennial 
creator  of  the  kinds  and  the  forms  of  life. 

If  in  this  manner  the  struggle  between  incomes  influences 
the  form  of  income,  it  influences  also  to  a  marked  extent  the 
various  kinds  and  degrees  of  income.  It  is  evident  on  the  face 
of  the  matter  that  the  struggle  between  incomes  of  various 


The  DisMbution  of  Income  301 

kinds,  by  leading  to  the  increase  of  some  incomes  at  the  expense 
of  others,  changes  the  quantity  of  wealth  agglomerated  in  the 
various  kinds  of  income.  Moreover,  the  kinds  of  income 
which,  in  the  struggle  between  incomes,  are  more  subject  to 
attack,  must  lose  a  portion  of  their  wealth  ;  whilst  this  loss 
often  leads  to  an  increase  in  the  wealth  of  those  incomes 
which  have  had  less  share  in  the  battle.  Thus  the  fluctuating 
incomes  are  exposed  to  reductions,  whilst  the  consoHdated 
incomes  remain  constant  or  may  increase.  Hence  the  total 
quantity  of  fluctuating  incomes  stands  in  a  diminishing  ratio  in 
respect  to  the  total  quantity  of  consoHdated  incomes  ;  that 
is  to  say,  the  profit  of  productive  capital  tends  to  diminish 
relatively  to  urban  rent  and  to  non-hazardous  unproductive 
capital.  Here  we  have  a  further  confirmation  of  what  was 
said  in  Chapter  IV. 

On  the  other  hand,  the  struggle  between  incomes  may  raise 
the  victorious  incomes  to  a  higher  degree,  and  may  depress 
the  vanquished  incomes  to  a  lower  degree,  thus  giving  rise  to 
degrees  of  income,  high  and  low,  which  did  not  previously 
exist,  and  increasing  the  disparity  between  the  maximum 
and  the  minimum  degree  of  income.  Further,  by  increasing 
the  quantity  of  wealth  of  the  greater  incomes  at  the  ex- 
pense of  that  of  the  lesser  incomes,  the  struggle  between  in- 
comes greatly  accentuates  the  tendency  to  the  condensation 
of  wealth  around  the  highest  degrees  of  income.  Herein  we 
have  an  additional  explanation  of  the  fact  previously  men- 
tioned that  the  larger  incomes  tend  to  constitute  an  increas- 
ing fraction  of  the  total  income. 

It  is  obvious  that  the  various  methods  of  struggle  between 
incomes  must  necessarily  diminish  the  social  product ;  for 
violence  and  fraud  absorb  a  quantum  of  energy  which  is 
therefore  withdrawn  from  production,  whilst  monopoly  is  'per 
se  a  great  paratyser  of  the  productive  forces.  Now,  by  dimin- 
ishing the  product,  the  struggle  between  incomes  must  neces- 
sarily diminish  the  absolute  quantity  of  the  total  income. 

If,  however,  in  this  way,  the  struggle  between  incomes 
effects  a  diminution  in  the  total  income,  it  may,  in  a  different 
way,  lead  to  the  opposite  result.  In  the  case  of  differentiated 
income,  the  recipients  of  income  who  are  worsted  in  the 
struggle  between  incomes,  and  who  are  therefore  impover- 


302  The  Economic  Synthesis 

ished,  may  reimburse  themselves  at  the  expense  of  subsist- 
ence, thus  diminishing  this  last ;  whilst  the  victorious  re- 
cipients of  income,  fortified  by  success,  are  better  able  to 
resist  the  demands  of  their  workpeople.  Hence,  in  the  former 
case,  subsistence  diminishes  and  income  correlatively  in- 
creases ;  whilst,  in  the  latter  case,  the  increase  of  subsistence 
and  the  correlative  diminution  of  income  are  prevented. 

This  influence  is  even  more  considerable  when  the  impover- 
ished recipients  of  income  are  at  once  thrust  down  into  the 
sphere  of  the  incomeless.  The  inevitable  result  of  the  descent 
of  a  part  of  the  recipients  of  income  into  the  class  of  the  in- 
comeless is  to  increase  the  number  of  these  last.  Now,  if  the 
wealth  which  was  formerly  consumed  unproductively  by  the 
defeated  recipient  of  income  is  now  annexed  to  the  capital- 
ised property  of  another  recipient  of  income  who  employs 
it  productively,  the  increase  in  the  supply  of  labour  is  accom- 
panied by  a  correlative  increase  in  the  total  subsistence;  and 
for  this  reason  the  individual  subsistence  may  remain  un- 
altered. If,  on  the  other  hand,  the  wealth  which  has  hitherto 
been  consumed  unproductively  by  the  defeated  recipient  of 
income  is  destroyed  in  the  struggle,  or  is  transferred  to  a  re- 
cipient of  income  who  consumes  it  unproductively,  the  in- 
crease in  the  supply  of  labour  is  not  accompanied  by  any 
increase  in  the  total  subsistence,  and  for  this  reason  the  in- 
dividual subsistence  is  necessarily  diminished  by  the  change, 
so  that  income  and  the  rate  of  income  are  thereby  correla- 
tively increased.  In  the  long  run,  however,  the  increase  in 
the  supply  of  labour  cannot  fail  to  increase  the  product,  and 
therewith  saving  and  the  mass  of  subsistence,  thus  restoring, 
sooner  or  later,  individual  subsistence  and  the  rate  of  income 
to  their  previous  dimensions. 

But  the  struggle  between  incomes  influences,  in  addition, 
the  absolute  quantity  of  income  and  also  the  quantity  of 
saving.  RecaUing  what  was  previously  pointed  out,  that  the 
increase  of  individual  income  may  diminish  saving,  we  should 
conclude  that  the  struggle  between  incomes,  by  the  very  fact 
that  it  leads  to  the  annexation  by  the  superior  incomes  of  a 
quantity  of  wealth  hitherto  appertaining  to  the  inferior 
incomes,  may  exercise  an  influence  in  the  direction  of  diminish- 
ing the  total  saving,  and  may  thus  effect  the  figure  of  income. 


The  Distribtition  of  Income  303 

Moreover,  the  struggle  between  incomes  exercises  a  yet  more 
remarkable  influence  upon  the  numerical  distribution  of  the 
recipients  of  income.  In  the  fourth  chapter  it  was  shown  that 
there  exists  a  series  of  diminishing  degrees  of  income  within 
which  the  individual  incomes  present  more  or  less  conspicuous 
disparity.  Let  us  assume  the  initial  condition  to  be  com- 
paratively simple,  namely  that  the  recipients  of  income  of 
different  degrees  are  equal  in  number  ;  then  the  struggle  between 
incomes  of  a  determinate  degree  and  the  correlative  enrichment 
of  some  incomes  at  the  expense  of  others,  necessarily  lead  to  a 
diminution  in  the  number  of  the  recipients  of  income  of  the 
given  degree,  correlatively  increasing  the  number  of  the 
superior  or  of  the  inferior  recipients  of  income.  To  simplify  the 
matter  further,  let  us  exclude  from  the  case  under  consideration 
the  ascent  of  the  victorious  recipients  of  income  to  a  higher 
degree,  and  let  us  further  suppose  that  all  the  defeated  recipients 
of  income  are  at  once  precipitated  to  the  lowest  sphere  of 
income.  If  the  intensity  of  the  struggle  were  identical  for  all  the 
degrees  of  income,  the  struggle  between  the  incomes  of  equal 
degree  would  result  simply  in  reducing  in  like  measure  the 
number  of  the  recipients  of  income  of  the  various  degrees,  the 
lowest  degree  excepted,  whilst  the  number  of  those  in  this  last 
degree  would  be  increased  by  a  figure  equal  to  the  sum  of  those 
lost  by  all  the  other  degrees.  We  know,  however,  that  the 
intensity  of  the  struggle  between  incomes  of  equal  degree  is 
directly  proportional  to  the  degree  of  income,  that  is,  that  the 
struggle  exhibits  a  greater  intensity  in  the  higher  degrees. 
Now,  since  the  effect  of  the  struggle  between  incomes  of  a 
given  degree  is  to  diminish  the  number  of  the  recipients  of 
income  of  that  degree,  the  necessary  result  of  the  greater 
intensity  of  the  struggle  between  incomes  of  a  higher  degree 
must  be  a  greater  mortality  among  the  incomes  of  this  degree, 
that  is  to  say,  a  greater  reduction  of  their  number.  Therefore, 
always  supposing  the  initial  number  of  the  recipients  of  income 
of  various  degrees  to  be  the  same,  the  numerical  reduction  of 
the  superior  recipients  of  income  (this  reduction  being  effected 
in  a  degree  proportional  to  the  extent  of  their  incomes),  and  the 
correlative  numerical  increase  in  the  number  of  the  recipients 
of  income  of  the  lowest  degree,  have  for  result  that  the  numeri- 
cal distribution  of  the  recipients  of  income  assumes,  after  the 


304  The  Econojnic  Sy7tthesis 

lapse  of  a  shorter  or  a  longer  period,  the  figure  of  a  pyramid 
(a  conclusion  which  seemed  so  remarkable  to  G.  B.  Say). 
Further,  at  the  outset  of  the  period  of  observation,  let  us 
suppose  the  numerical  distribution  of  the  recipients  of  income 
to  present  the  form  of  an  inverted  pyramid,  that  is  to  say, 
let  us  assume  the  number  of  the  recipients  of  income  to  be 
greater  in  proportion  as  is  greater  the  amount  of  their  income  ; 
it  follows  that  the  recipients  of  the  maximum  incomes,  among 
whom  the  struggle  is  more  intense,  will  necessarily  be  subjected 
to  a  process  of  elimination  more  severe  than  that  by  which  are 
affected  the  recipients  of  income  as  we  pass  down  the  scale  of 
incomes,  since  among  those  lower  in  the  scale,  precise^  because 
their  incomes  are  less,  the  struggle  is  less  fierce.  It  follows 
that  the  recipients  of  the  larger  incomes  undergo  a  greater 
numerical  reduction.  If  this  more  rapid  process  of  elimination 
of  the  superior  incomes  should  continue,  the  moment  will 
necessarily  arrive  at  which  the  number  of  the  recipients  of 
greater  incomes  has  become  less  than  the  number  of  the  recipi- 
ents of  smaller  incomes  ;  that  is  to  say,  after  the  struggle  has 
lasted  a  certain  time,  the  pyramid  will  no  longer  be  inverted, 
but  will  be  re-established  on  its  base.  This  result  is  unaffected 
even  if,  in  place  of  supposing  that  the  vanquished  in  the  struggle 
between  incomes  are  thrust  down  into  the  lowest  sphere  of 
income,  we  suppose,  more  in  conformity  with  what  really 
happens,  that  they  merely  fall  into  one  of  the  lower  zones  of 
income. 

The  struggle  is,  however,  not  waged  only  between  incomes 
of  the  same  degree,  but  yet  more  between  incomes  of  different 
degrees.  Now  the  struggle  between  incomes  of  different 
degrees  results  in  the  depression  of  a  part  of  the  recipients  of 
income  of  the  lower  degrees,  who  are  necessarily  the  defeated 
parties,  into  a  stiU  lower  sphere,  and  perhaps  to  the  very 
lowest  sphere.  Inasmuch  as  we  have  seen  that  the  intensity 
of  the  struggle  between  two  incomes  of  different  degrees  is, 
ceteris  paribus,  directly  proportional  to  the  extent  of  the 
superior  income,  it  follows,  given  a  number  of  incomes  de- 
creasing in  degree,  and  assuming  the  differences  between  the 
degrees  to  be  represented  by  equal  figures,  that  the  intensity  of 
the  struggle  between  two  incomes  of  successive  degrees  declines 
as  we  pass  down  the  scale  ;   in  other  words,  if  the  dechning 


The  Distribittion  of  Income  305 

series  of  incomes  be  represented  by  the  figures  5,  4,  3,  2,  etc., 
the  struggle  between  the  incomes  5  and  4  is  more  intense 
than  the  struggle  between  the  incomes  4  and  3,  and  so  on. 
It  results  from  this  that  the  owners  of  the  higher  incomes  (the 
maximum  income  excepted),  for  the  very  reason  that  they  are 
the  victims  of  a  fiercer  struggle  on  the  part  of  the  recipients  of 
incomes  immediately  higher  in  the  scale,  must  exhibit  a  larger 
proportion  of  falls  than  the  minimal  category  of  incomes  ; 
that  is  to  say,  the  number  of  the  larger  incomes  suffers  a 
reduction  proportionately  greater  than  is  suffered  by  the 
incomes  as  we  pass  down  the  scale,  since  those  lower  in  the 
scale  are  threatened  by  less  formidable  antagonists  ;  and  here 
we  have  another  reason  for  the  diminution  in  the  numerical 
proportion  of  the  greater  recipients  of  income  as  compared 
with  those  lower  down  in  the  scale. 

The  struggle  between  incomes  of  two  successive  degrees 
influences  in  its  turn  the  relationships  between  the  incomes 
lower  down  in  the  scale.  The  incomes  of  a  given  degree,  injured 
by  the  attacks  of  the  recipients  of  income  of  the  next  degree 
above  their  own,  endeavour  to  reimburse  themselves  by 
reacting  with  greater  violence  upon  the  recipients  of  income 
next  below  them  in  the  scale,  and  this  increases  the  number  of 
these  last  who  are  depressed  to  yet  lower  zones. ^  Now,  since 
the  intensity  of  the  struggle  between  incomes  of  successive 
degrees  diminishes  as  we  pass  down  the  scale  of  incomes,  it 
follows  that  the  influence  exercised  upon  the  recipients  of 
income  lower  down  in  the  scale,  or  the  fraction  of  these  which 
is  depressed  to  a  lower  level,  becomes  less  as  we  pass  down  from 
degree  to  degree.  Herein  we  have  at  work  an  additional 
influence,  co-operating  with  the  reason  last  indicated,  to  effect 
a  diminution  in  the  numerical  reduction  of  the  recipients  of 
income  as  we  descend  in  the  scale,  and  to  accentuate  the  pyra- 
midal form  assumed  by  the  figure  representing  the  recipients  of 
income. 

The  struggle  between  incomes,  however,  does  not  only  effect 
the  descent  of  the  vanquished  towards  the  sphere  of  the  lowest 
incomes,  but  in  addition  it  raises  the  victorious  recipients  of 
income  into  a  higher  sphere  of  income .   Now,  since  the  intensity 

^  Consult  Simmel,  Soziologie  der  Ueber-  und  Unterordnungy  "  Archiv 
fiir  Sozialwiss.,"  1907,  pp.  600,  et  seq. 


3o6  The  Economic  Synthesis 

of  the  struggle  between  incomes  is  directly  proportional  to  the 
entity  of  the  income,  it  follows  that,  in  a  given  degree  of 
income,  there  is  a  proportion  of  victors,  and  therefore  of 
recipients  of  income  who  ascend  to  a  higher  degree  of  income, 
larger  than  that  which  will  be  found  in  the  case  of  the  recipients 
of  income  of  the  degree  next  beneath  in  the  scale.  Hence  the 
number  of  the  recipients  of  each  degree  of  income  diminishes, 
in  consequence  of  the  ascent  of  a  part  of  these  to  a  superior 
degree,  more  than  the  number  increases  by  the  ascent  of  a 
part  of  the  recipients  of  income  from  the  degree  next  beneath 
in  the  scale.  In  other  words,  each  degree  of  income  (with  the 
exception  of  the  maximum,  which  receives  increments  from 
below  without  losing  any  of  its  members  to  a  higher  degree, 
and  therefore  definitely  increases)  is  subject  to  a  reduction 
in  the  number  of  the  recipients  of  income. — And  the  higher  the 
degree  of  income,  the  greater  is  the  numerical  excess  of  the 
recipients  of  income  who  rise  to  a  higher  degree  of  income,  over 
the  recipients  of  income  who  pass  upwards  into  the  degree  in 
question  from  the  degree  next  beneath  in  the  scale,  the  greater, 
that  is  to  say,  is  the  numerical  reduction  of  the  recipients  of 
income.  Herein  we  have  a  third  influence,  reinforcing  the 
two  previously  considered,  and  determining,  like  these,  the 
numerical  increase  of  the  recipients  of  income  as  we  proceed 
lower  in  the  scale. 

Now,  these  three  influences — each  of  which  is  a  co-factor  in 
determining  the  numerical  inferiority  of  the  recipients  of  in- 
come of  every  degree  as  compared  with  the  recipients  of 
income  of  the  degree  next  beneath  in  the  scale, — ^when  working 
in  co-operation,  give  rise  to  a  marked  numerical  increase  in  the 
recipients  of  income  as  we  descend  in  the  scale. — Let  us  assume 
the  initial  condition  to  be  that  in  which  there  are  several 
numerically  equal  groups  of  recipients  of  income  of  degrees 
gradually  diminishing;  the  struggle  between  the  incomes 
of  equal  degree,  being  proportional  in  intensity  to  the  degree  in 
income,  determines,  in  each  group,  a  reduction  precisely 
proportional  to  the  entity  of  the  respective  income  ;  that  is  to 
say,  the  number  of  the  recipients  of  income  of  the  varying 
degrees  who  remain  victors  on  the  field  as  the  outcome  of  the 
struggle  between  incomes  of  equal  degree,  is  inversely  propor- 
tional to  the  entity  of  the  incomes  concerned.  Thus,  given  several 


The  Distribution  of  Income  307 

numerically  equal  groups  of  recipients  of  income,  in  degrees 
diminishing  in  the  ratios  of  8,  4,  2,  1,  if  the  struggle  between 
the  incomes  of  the  degree  8  reduces  the  recipients  in  this  degree 
to  the  figure  x,  the  struggle  between  the  incomes  of  the  degree 
4,  being  only  half  as  intense,  reduces  the  recipients  in  this 
degree  to  a  figure  double  the  preceding,  that  is  to  2  a;,  the 
struggle  between  the  recipients  of  income  of  the  degree  2 
reduces  their  number  to  4  x,  and  the  struggle  between  the 
recipients  of  income  of  the  degree  I,  reduces  their  number  to 
%  X ;  that  is  to  say,  the  number  of  the  recipients  of  income 
of  the  different  degrees  will  come  to  vary  precisely  in  inverse 
ratio  to  the  degree  of  the  respective  incomes.^  Since,  how- 
ever, in  addition  to  the  struggle  between  incomes  of  equal 
degree,  there  is  carried  on  a  struggle  between  incomes  of 
different  degrees,  and  since  the  two  struggles,  in  addition  to 

1  In  actual  fact,  the  intensity  of  a  struggle  is  measured  by  the  number  of 
those  who  fall,  and  not  by  the  number  of  those  who  remain  victors  on  the 
field  ;  for,  the  more  intense  the  struggle,  the  greater  is  the  number  of  the  slain. 
It  may  therefore  be  affirmed  that  the  number  of  the  recipients  of  income 
who  fall  is  always  directly  proportional  to  the  intensity  of  the  struggle,  that 
is  to  say,  to  the  entity  of  the  income.  But  through  the  very  fact  that  the 
number  of  the  recipients  of  income  who  fall  is  directly  proportional  to  the 
entity  of  the  income,  the  number  of  the  recipients  of  income  who  survive 
upon  the  field  may  fail  to  be  inversely  proportional  to  the  entity  of  the  income ; 
for  a  difference  may  fail  to  be  inversely  proportional  to  the  subtracter,  and 
therefore  the  number  of  survivors  may  fail  to  be  inversely  proportional  to 
the  number  of  those  who  fall.  Thus,  for  example,  it  may  happen  that  we 
have  : 

Number  of  recipients  of 
income,  among  100  receiving  Number  of 

incomes  of  equal  degree,  who  recipients  of  income 

Income.  succumb  in  the  struggle,  who  survive. 

20         20         80 

10         10         90 

Here  the  number  of  the  recipients  of  income  of  each  degree  who  succumb  is 
precisely  proportional  to  the  entity  of  the  income,  but  the  number  of  the 
recipients  of  income  of  each  degree  who  survive  is  less  than  inversely  propor- 
tional to  the  entity  of  the  income. 
Conversely  it  may  happen  : 

Recipients  of 
income  per  cent  Recipients  of 

Income.  who  succumb.  income  who  survive. 

20  70  30 

10  35  65 

and  here  the  number  of  the  recipients  of  income  of  each  degree  who  survive 
is  more  than  inversely  proportional  to  the  entity  of  the  income.  Nevertheless, 
the  differences  between  the  ratio  of  those  who  succumb  and  the  ratio  of  those 
who  survive  are  generally  so  small  that  we  may  without  serious  lack  of  precision 
measure  the  intensity  of  the  struggle  by  the  number  of  the  survivors  ;  and 
therefore  it  is  not  incorrect  to  affirm  that  the  number  of  the  recipients  of  income 
of  each  degree  who  survive  in  the  struggle  between  incomes  of  equal  degree  is 
inversely  proportional  to  the  entity  of  their  incomes. 


3o8  TJu  Economic  Synthesis 

bringing  about  the  fall  of  the  vanquished  recipients  of  in- 
come, determine  the  ascent  of  the  victors  to  an  income 
of  higher  degree,  and  since  all  this  further  diminishes  the  ratio 
between  the  recipients  of  income  of  each  degree  and  the 
recipients  of  income  of  the  degree  next  beneath  in  the  scale, 
it  follows  that  the  number  of  the  recipients  of  income  of 
each  degree,  when  compared  to  the  number  of  the  recipients 
of  income  of  the  degree  next  above  in  the  scale,  is  found 
to  exhibit  a  greater  ratio  than  that  above  indicated  ;  that 
is  to  say,  the  ratio  between  the  two  is  found  to  be  more  than 
inversely  proportional  to  the  entity  of  the  respective  incomes. 
To  express  the  matter  in  a  different  way,  the  number  of  the 
recipients  of  income  of  the  various  degrees  is  in  inverse  ratio, 
not  to  the  degree  of  the  income,  but  to  a  power  of  that  degree. — 
If  therefore  the  struggle  between  incomes  of  equal  degree 
brings  it  about  ftr  se  that  the  number  of  the  recipients  of 
income  is  inversely  proportional  to  the  first  power  of  their 
respective  incomes,  the  fact  that  there  are  superadded  the 
struggle  between  incomes  of  different  degrees  and  the  ascent 
of  the  victorious  recipients  of  income,  brings  it  about  that  the 
number  of  the  recipients  of  income  of  various  degrees  is  in- 
versely proportional  to  some  greater  power  than  the  first 
power  of  their  respective  incomes.  For  example,  given  incomes 
on  the  descending  scale  of  100,  50,  and  25,  the  respective 
recipients  of  income,  instead  of  being  in  the  numerical 
ratios  25  :  50  :  100,  will  be  in  the  numerical  ratios  625  :  2500  : 
10,000  ;  that  is  to  say,  as  we  descend  in  the  scale,  they 
are  not  inversely  proportional  to  the  differences  between 
the  incomes,  but  inversely  proportional  to  the  squares  of  these 
differences. 

Hitherto  we  have  supposed  that  the  distinction  between  the 
incomes  is  quantitative  merely.  But  between  incomes  there 
exist  also  qualitative  differences.  In  the  first  place,  the  in- 
comes may  differ  in  form.  Now,  in  so  far  as  the  income  of 
minimal  degree  tends  to  assume  the  form  of  undifferentiated 
income,  the  struggle  between  incomes,  inasmuch  as  it  increases 
the  number  of  the  recipients  of  income  of  minimal  degree, 
tends  to  increase  the  numerical  proportion  of  the  recipients  of 
undifferentiated  income  as  compared  with  the  recipients  of 
differentiated  income. 


The  Distribution  of  Income  309 

Incomes  may  also  be  of  different  kinds  ;  and  the  numerical 
distribution  of  the  recipients  of  income  of  diverse  degrees 
differs  in  one  kind  of  income  from  what  it  is  in  another.  First 
of  all,  there  is  a  substantial  difference  in  this  respect  between 
income  from  capitaHsed  property  and  professional  income. 
We  have  previously  shown  that  the  lesser  incomes  and  those  of 
medium  size  are  predominantly  professional  incomes,  whilst 
the  larger  incomes  are  above  all  incomes  from  capitalised 
property.  It  follows  from  this  that  the  pyramid  of  the  re- 
cipients of  professional  incomes  must  be  a  much  shorter  one 
than  that  of  the  recipients  of  income  from  capitaHsed  property, 
for  all  the  uppermost  part  is  wanting  in  the  case  of  the  former  ; 
and  it  must  be  much  broader  in  the  base,  because  of  the 
aggregation  here  of  minimal  incomes.  It  follows  also  from 
these  considerations  that  the  pyramid  representing  all  the 
recipients  of  income  (incomes  from  capitalised  property 
together  with  professional  incomes)  is  much  more  ample  and 
accentuated  than  is  the  pyramid  representing  only  the  re- 
cipients of  income  from  capitalised  property. 

Let  us  leave  on  one  side  professional  incomes,  to  consider 
only  incomes  from  capitaHsed  property.  Recalling  what  we 
have  previously  shown,  that  income  always  increases  less  than 
proportionally  to  the  increase  in  property,  we  may  infer  that 
the  number  of  the  recipients  of  income  of  various  degrees 
derived  from  capitalised  property,  if  inversely  proportional 
to  the  quantity  of  their  incomes  raised  to  a  given  power, 
necessarily  exhibits  a  ratio  which  is  less  than  inversely  pro- 
portional to  the  quantity  of  their  capitalised  property  raised 
to  the  same  power. 

However,  these  same  incomes  from  capitalised  property  are 
distinguished,  as  we  know,  by  varying  pugnacity.  Now,  since 
increase  in  the  number  of  the  recipients  of  income  as  we 
descend  in  the  scale  is  the  outcome  of  the  struggle  between 
incomes,  it  follows  that  this  increase  must  naturally  be  more 
accentuated  where  we  have  to  do  with  the  more  combative 
varieties  of  income ;  that  is  to  say,  it  will  be  more  marked  in 
the  case  of  fluctuating  than  in  the  case  of  consoBdated  in- 
comes. Therefore  the  fluctuating  incomes  will  be  arranged 
in  a  more  accentuated  pyramid  than  the  consoUdated  incomes  ; 
and  the  pyramid  representing  all  the  recipients  of  income 


3IO  The  Economic  Synthesis 

(fluctuating  and  consolidated)  must  undergo  a  specific  accentua- 
tion in  those  degrees  in  which  fluctuating  incomes  predominate, 
and  a  corresponding  attenuation  in  those  degrees  in  which 
consohdated  incomes  predominate. 

We  have  seen,  however,  that, in  addition  to  the  incomes  which 
participate  more  or  less  actively  in  the  struggle  between  in- 
comes, there  are  other  incomes,  or  degrees  of  income,  which  are 
perfectly  stable  and  are  altogether  removed  from  that  struggle. 
Now  the  stable  incomes,  precisely  because  they  are  unaffected 
by  the  struggle  between  incomes,  or  because  they  ward  off 
that  struggle,  are  exempt  from  the  injury  which  the  struggle 
inflicts  upon  its  victims  ;  that  is  to  say,  they  are  exempt  from 
the  fall  to  a  lower  sphere  of  income.  If,  then,  in  a  given  degree 
of  income,  stable  incomes  predominate,  the  recipients  of 
income  of  this  degree  will  suffer  no  numerical  reduction  in 
consequence  of  the  struggle  between  incomes,  or  will  suffer 
much  less  reduction  than  that  which  is  suffered  by  the  recipients 
of  income  of  other  degrees.  Hence  the  number  of  the  recipients 
of  income  at  this  point  remains  greater  than  it  would  be 
were  not  the  income  of  this  degree  stable.  On  the  other  hand, 
in  so  far  as  this  degree  of  income  exhibits  a  high  numerical 
density,  to  this  extent  also  the  number  of  the  recipients  of 
income  in  the  degree  next  beneath  in  the  scale  will  be  more 
attenuated  than  would  have  been  the  case  had  not  the  incomes 
next  above  been  stable ;  for,  had  it  been  otherwise,  a  part  of  the 
recipients  of  income  of  the  higher  of  the  two  degrees  would 
have  fallen  to  the  lower.  Thus  the  numerical  distribution  of 
the  recipients  of  income  is  changed  in  two  ways  :  there  is  an 
increase  in  the  degree  of  income  in  which  stable  incomes  pre- 
dominate, and  a  diminution  in  the  degree  next  beneath  in  the 
scale  ;  that  is  to  say,  at  the  point  corresponding  to  the  stable 
incomes,  the  pyramid  representing  the  recipients  of  income 
undergoes,  or  may  undergo,  inversion.  Nor  is  this  all.  For 
the  very  reason  that  in  the  degree  of  income  next  beneath 
the  one  in  which  the  stable  incomes  prevail,  the  number  of  the 
recipients  of  income  is  comparatively  small,  it  follows  also 
that  the  number  of  these  latter  is  smaller  who  attack  the  in- 
comes yet  lower  in  the  scale  ;  less,  therefore,  is  the  numerical 
reduction  suffered  by  these  last,  so  that  their  number  is  greater 
than  it  would  otherwise  have  been.    In  this  way  the  greater 


The  Distrihttion  of  Income  31 1 

numerical  density,  or  the  exemption  from  struggle  of  the 
recipients  of  stable  income,  by  diminishing  the  number  of  the 
recipients  of  income  next  beneath  in  the  scale,  leads  'per  se 
to  an  increase  in  the  number  of  the  recipients  of  income  in  the 
degree  immediately  beneath  the  last-named.  Thus  the  stabiHty 
possessed  by  the  income  of  higher  degree  leads  to  an  increase, 
not  merely  in  the  number  of  the  recipients  of  that  particular 
income,  but  also  to  an  increase  in  the  number  of  the  recipients 
of  income  of  a  degree  much  lower  in  the  scale  ;  thus  this 
last  exhibits  a  high  numerical  density,  not  because  the  income 
in  this  degree  is  itself  stable,  but  as  an  indirect  outcome  of  the 
inherent  stability  of  the  income  of  higher  degree.  In  other 
words,  the  directly  stable  income  generates  per  se  an  income 
endowed  with  a  reflected  equihbrium,  or  with  an  equiHbrium 
which  is  nothing  more  than  the  shadow  or  the  reverberation 
of  the  first. 

In  this  manner  the  presence  of  stable  incomes  modifies  or 
attenuates  the  pyramid  of  the  recipients  of  income  in  two 
different  ways,  or  introduces  a  duplex  interpolation  ;  it  sub- 
tracts from  two  degrees  of  income  a  certain  number  of  re- 
cipients of  income  in  order  to  increase  with  these  elements 
two  degrees  of  income  higher  in  the  scale.  This  renders  the 
distribution  of  income  and  the  pyramid  of  the  recipients 
of  income  less  accentuated,  but  does  not  necessarily  give 
rise  to  any  marked  change  in  the  essential  lineaments  of 
these. 

What  results  if  there  are  certain  degrees  of  income  in  which 
the  recipients  of  income  form  combines  ?  The  degrees  of 
income  in  which  this  happens,  being  as  a  rule  immune  from 
all  struggle  within  the  Hmits  of  their  own  degree,  and  being 
able  to  resist  the  attack  of  the  recipients  of  superior  incomes, 
do  not  lose  any  part  of  their  own  members  to  inferior  degrees 
of  income,  and  therefore  present,  or  may  present,  not  a  less  but 
a  greater  numerical  density  than  that  of  the  income  next 
beneath  in  the  scale  ;  that  is  to  say,  at  the  point  at  which  we 
have  combined  incomes,  the  pyramid  of  incomes  is  arrested  or 
inverted.  If  the  combine  is  formed  among  the  recipients  of  an 
income  inferior  to  the  maximum,  its  effect  is  to  increase  the 
proportion  of  the  recipients  of  income  in  this  degree  as  com- 
pared with  those  of  a  superior  and  of  an  inferior  degree  ;  that 


312  The  Economic  Synthesis 

is  to  say,  it  accentuates  the  pyramid  in  the  region  superior  to 
the  combined  income,  whilst  it  attenuates  or  inverts  it  in  the 
region  immediately  beneath  this.  On  the  other  hand,  a  com- 
bination among  the  recipients  of  income  of  any  given  degree, 
rendering  fiercer  their  attack  upon  the  recipients  of  income 
lower  down  in  the  scale,  leads  to  the  fall  of  a  greater  number 
of  these  latter  into  a  yet  lower  degree  ;  hence  the  numerical 
density  of  the  last  is  increased  as  an  effect  of  the  combination ; 
that  is  to  say,  the  pyramid  of  the  recipients  of  income  after 
being  attenuated  in  the  region  immediately  beneath  that  of  the 
combined  income,  becomes  accentuated  in  a  region  yet  lower 
in  the  scale.  If,  however,  the  combine  is  formed  among  the 
recipients  of  income  of  the  maximum  degree,  the  result  will  be 
identical  with  that  just  elucidated  only  as  concerns  the  region 
below  that  of  the  combined  income,  for  in  such  conditions 
there  is  lacking  any  region  above  the  combined  income. 
In  such  a  case,  the  number  of  the  recipients  of  incomes  in  the 
degrees  inferior  to  the  combined  income  is  less  than  it  would  be 
did  the  combine  not  exist,  for  the  result  of  the  combination  is 
to  prevent  the  fall  of  a  part  of  the  combined  recipients  of 
income  into  lower  zones  ;  less  is  the  number  of  the  recipients 
of  income  of  the  degree  immediately  beneath  the  maximum, 
either  for  the  reason  just  given,  or  on  account  of  the  violent 
attack  upon  the  incomes  of  this  degree  on  the  part  of  the 
combined  recipients  of  income  ;  and,  correlatively,  the  number 
is  greater  of  the  recipients  of  income  of  the  lowest  degree, 
owing  to  the  fall  into  a  lower  sphere  of  the  recipients  of  income 
overcome  by  the  combined  recipients  of  income. — Hence  the 
pyramid  of  the  recipients  of  income  becomes  widened  at  the 
summit  and  at  the  base  ;  or,  to  express  the  matter  better, 
the  primitive  pyramid  tends  to  be  transformed  into  two 
pyramids,  one  inverted  and  the  other  erect,  having  a  common 
vertex.  To  sum  up,  we  may  conclude  that  the  formation  of 
the  combine  gives  rise  to  a  super-normal  numerical  inferiority 
(considered  in  relation  to  the  combined  recipients  of  income) 
of  the  recipients  of  income  of  degree  superior  to  the  combined 
income,  to  a  sub-normal  numerical  superiority  of  the  incomes 
of  the  degree  next  below  the  combined  incomes  in  the  scale, 
and  finally  to  a  super-normal  numerical  superiority  of  the 
recipients  of  income  yet  lower  in  the  scale.    But  let  us  hasten  to 


The  Distribution  of  Income  313 

add  that,  while  these  influences  may  indeed  render  more  or 
less  marked  the  pyramidal  form  representing  the  numerical 
distribution  of  the  recipients  of  income,  or  may  introduce  some 
asymmetry  into  the  figure  at  this  point  or  that,  they  cannot 
change  the  general  outlines  of  the  figure  or  the  formula  arrived 
at  in  the  preceding  discussion. 

An  influence  analogous  to  that  exercised  by  combination 
among  the  recipients  of  the  largest  incomes  is  exercised  by  the 
struggle  between  subsistence  and  income.  This  struggle  does 
not  do  much  harm  to  the  greater  incomes,  which  are  better 
armed  for  the  fight ;  but  is  apt  to  be  fatal  to  the  lesser  and  the 
medium  incomes,  which  suffer  damage  and  are  forced  into  a 
lower  sphere.^  In  this  way  the  pyramid  of  the  recipients  of 
income  becomes  widened  at  the  base. 

Hitherto  we  have  always  assumed  that,  while  those  van- 
quished in  the  struggle  between  incomes  are  precipitated  into  a 
lower  sphere  of  income,  they  yet  remain  recipients  of  income. 
In  such  conditions,  the  struggle  between  incomes,  though  it 
modifies  the  numerical  distribution  of  the  recipients  of  incomes 
of  different  forms,  of  different  kinds,  or  of  different  degrees, 
does  not  in  any  way  affect  the  total  number  of  the  recipients 
of  income.  In  most  cases,  however,  the  struggle  between 
incomes  precipitates  a  part  of  the  recipients  of  income  into 
the  class  of  the  incomeless,  that  is  of  those  who  are  reduced  to 
subsistence  alone  ;  and  in  this  case  the  struggle  between 
incomes  does  not  merely  modify  the  numerical  proportion 
between  the  recipients  of  incomes  of  various  forms,  kinds,  or 
degrees,  but  directly  diminishes  the  total  number  of  the 
recipients  of  income.  This  influence  is  so  striking  that  certain 
authors  have  limited  their  considerations  to  it  alone.  Thus, 
Marx,  for  example,  lays  stress  only  on  the  numerical  reduction 
of  the  recipients  of  income  as  the  outcome  of  the  struggle 
between  incomes,  considering  this  to  be  the  weapon  that  is  to 
lead  to  the  overthrow  of  the  capitalist  system  ;  and  he  takes  no 
account  of  the  modification  in  the  numerical  proportion  of  the 
recipients  of  income  of  various  degrees  which  is  so  prominent  and 
fundamental  a  consequence  of  the  struggle  between  incomes. 

*  In  Sicily  the  rise  in  the  wages  of  agricultural  labour,  due  largely  to 
emigration,  has  been  disastrous  to  the  peasant  proprietors  (civili)  (Lorenzoni, 
Relazione  sulla  inchiesta  compiuta  in  Sicilia,  Palermo,  1907,  p.  86). 


3 1 4  The  Economic  Synthesis 

If,  now,  the  fraction  of  the  recipients  of  income  who  fall  into 
the  sphere  of  the  incomeless  is  the  same  in  all  degrees  of  in- 
come, the  result  of  their  fall  is  merely  to  reduce  the  dimensions 
of  the  pyramid  of  the  recipients  of  income,  leaving  unaffected 
its  steepness  and  its  form.  But  if  the  fraction  of  the  recipients 
of  income  precipitated  into  the  sphere  of  the  incomeless  differs 
in  the  different  degrees  of  income,  then  the  reduction  in  the 
dimensions  of  the  pyramid  is  accompanied  by  a  change  in  its 
form,  the  various  spheres  of  income  being  differentially  affected. 
That  is  to  say,  if  it  is  the  uppermost  spheres  of  income  which 
are  chiefly  affected,  the  vertex  of  the  pyramid  becomes  more 
acute ;  if  it  is  the  middlemost  spheres  of  income  which  are 
chiefly  affected,  the  middle  stratum  of  the  pyramid  becomes 
attenuated,  or  the  p3T:amid  may  be  transformed  into  a 
clepsydra  ;  whilst  if  it  is  the  lowest  spheres  of  income  which  are 
chiefly  affected,  the  pyramid  undergoes  contraction  at  the  base. 

Whilst,  however,  some  of  the  recipients  of  income  are  thus 
precipitated  into  the  sphere  of  the  incomeless,  there  is  a  certain 
number  of  the  incomeless,  more  or  less  considerable,  who 
succeed  in  rising  above  the  level  of  those  receiving  subsistence 
merely,  and  in  attaining  to  an  income  ;  this  income  is  at  first 
undifferentiated,  but  in  favourable  circumstances  may  become 
transformed  into  differentiated  income.  This  is  true,  not 
merely  of  our  own  days,  in  which  all  professions  and  social 
conditions  are  legally  accessible  to  every  one  :  but  it  is  also  true, 
though  to  a  much  less  considerable  extent,  of  earlier  times  ; 
for  even  in  those  days  certain  labourers  and  domestic  servants 
were  able  to  escape  from  the  condition  of  servitude  to  attain  to 
liberty  and  to  differentiated  income.  In  all  cases,  therefore, 
and  in  every  age,  the  movement  by  which  some  of  the  recipients 
of  income  descend  into  the  class  of  the  incomeless  is  counter- 
balanced by  the  ascent  of  some  of  the  labourers  into  the  class 
of  the  recipients  of  income.  The  respective  measures  of  these 
two  movements,  and  which  of  the  two  tends  to  be  in  excess  of 
the  other,  depends  upon  several  factors  which  will  be  pointed 
out  below  ;  but  in  any  case  the  numerical  density  of  the 
recipients  of  income  taken  as  a  whole  is  the  resultant  of  these 
two  antagonistic  movements,  whilst  the  numerical  density  of  the 
recipients  of  income  of  each  degree  is,  ceteris  paribus,  less  or 
greater,  according  as  the  number  of  the  recipients  of  income 


The  Distribution  of  Income  315 

of  the  degree  in  question  who  are  precipitated  into  the  zone 
of  the  incomeless  is  greater  or  less  than  the  number  of  the 
incomeless  who  ascend  to  the  income  of  this  degree.  Since  the 
labourers  who  receive  the  highest  wages,  or  the  labourers  of 
the  highest  degree,  that  is  to  say,  those  who  most  often  become 
recipients  of  income,  in  most  cases  get  no  farther  up  the  scale 
of  income  than  the  lowest  degree,  it  follows  that  the  numerical 
density  of  the  recipients  of  income  of  the  lowest  degree  under- 
goes a  special  increase,  and  sometimes  ends  by  being  greater 
than  that  of  the  labourers  of  the  highest  degree,  that  is,  of 
those  who  are  found  in  the  uppermost  levels  of  subsistence. 

Thus  the  existence  of  stable  and  combined  incomes,  and  the 
mutual  interchange  between  the  class  of  the  recipients  of 
income  and  the  class  of  the  incomeless,  produce  in  the  social 
pyramid  numberless  re-entrant  and  projecting  angles  which 
make  it  resemble  rather  Mt.  Cervin  in  form  than  the  tombs  of 
the  Pharaohs.  But,  notwithstanding  all  this,  the  distribution 
of  the  recipients  of  income  conforms  always  to  the  general  law 
which  has  been  indicated  in  the  preceding  pages,  and  presents 
the  figure  of  a  pyramid.  Now,  when  we  recall  what  was  said 
in  the  preceding  chapter  concerning  the  distribution  of  sub- 
sistence, it  will  be  evident  that  the  numerical  distribution  of 
the  recipients  of  income  of  various  degrees  is  subject  to  a  law 
essentially  different  from  that  which  governs  the  numerical 
distribution  of  the  recipients  of  subsistence  of  varying  amount  ; 
for  the  recipients  of  subsistence  are  distributed  in  accordance 
with  a  curve,  and  those  of  income  in  accordance  with  a  pyramid. 
Thus  the  radical  and  essential  difference  between  subsistence 
and  income  finds  graphic,  and  we  may  almost  say  tangible, 
expression  in  the  difference  between  the  figures  representing 
the  distribution  of  each  ;  and  herein  we  have  a  new  proof  of  the 
radical  inanity  of  the  theory  which  endeavom's  to  effect  the 
forcible  confusion  of  these  two  heterogeneous  entities  into  a 
single  undifferentiated  category. 

Thus  the  integral  distribution  of  wealth  is  incapable  of 
representation  by  a  single  figure,  whether  curve,  parabola,  or 
pyramid,  and  can  be  represented  only  by  the  duplex  figure  of  a 
pyramid,  or  a  truncated  pyramid,  superposed  upon  a  curve,  or 
let  us  say  upon  a  circle.  Since,  as  we  have  seen,  the  numerical 
density  of  the  recipients  of  income  of  the  lowest  degree  is 


3i6  The  Economic  Synthesis 

usually  greater  than  that  of  the  labourers  who  receive  sub- 
sistence of  the  maximum  degree,  it  follows  that  the  uppermost 
part  of  the  curve  representing  the  recipients  of  subsistence  is 
narrower  than  the  base  of  the  pyramid  representing  the  reci- 
pients of  income  ;  that  is  to  say,  the  general  distribution  of 
wealth  exhibits  a  contraction  at  the  moment  in  which  we  pass 
from  income  to  subsistence,  as  may  be  precisely  represented 
by  the  following  figure  : 


The  numerical  distribution  of  the  recipients  of  income 
in  accordance  with  the  law  here  indicated  has  the  most 
remarkable  economic  consequences.  In  fact,  since  the 
economic  power  (not  to  speak  of  greater  powers)  of  which 
each  man  disposes,  is  directly  proportional  to  his  income, 
and  inversely  proportional  to  the  number  of  coexisting  re- 
cipients of  equal  or  superior  incomes,  it  follows  that  the 
pyramidal  distribution  of  income  subjects  the  mass  of  the 
recipients  of  income  and  of  the  labourers  to  a  restricted 
ohgarchy  of  potentates.  The  tyrannical  domination  of  these 
manifests,  as  we  have  seen,  terrible  effects  in  the  struggle 
between  incomes,  which  is  directly  disastrous  to  the  minor 
recipients  of  income,  and  in  many  cases  ultimately  renders 
impossible  the  continued  existence  of  the  latter  ;  but  even 
when  the  matter  does  not  go  as  far  as  this,  the  oligarchal 
power  of  the  greater  recipients  of  income  creates  or  regulates 
at  its  own  arbitrary  will  the  conditions  in  which  develop  the 


The  Distribution  of  Income  317 

lives  of  the  lesser  recipients  of  income  and  of  the  labourers,  or 
determines  the  orbit  in  which  these  revolve.^ 

In  this  way  there  arises  a  hierarchy  of  economic  powers 
which  presents  the  closest  analogy  with  the  hierarchy  of 
military  or  executive  powers.  Just  as  in  the  executive  we  have 
a  limited  number  of  chiefs,  commanding  a  larger  number  of 
sub-chiefs,  and  these  a  still  larger  number  of  subordinates, 
down  to  the  lowest  employees  who  exhibit  the  maximum 
numerical  density,  in  the  same  way  a  small  handful  of  the 
greatest  recipients  of  income  rules  a  larger  number  of  less 
wealthy  recipients  of  income,  these  rule  a  still  greater  number 
of  recipients  of  more  modest  incomes,  and  so  on  down  to  the 
incomes  of  the  lowest  degree,  which  are  the  most  numerous. 
Between  these  two  phenomena,  thus  graphically  comparable, 
certain  substantial  disparities  doubtless  exist.  If  the  official 
hierarchy  is  the  deHberately  willed  product  of  essentially 
technical  motives,  if  it  is  the  essential  condition  of  the  swift 
execution  of  orders  and  of  the  punctual  fulfilment  of  duties, 
the  hierarchy  of  the  recipients  of  income  is  no  more  than  the 
unconscious  and  mechanical  outcome  of  the  eternal  conflict 
between  incomes,  and  does  not  directly  correspond  to  any 
rationally  conceived  aim.  It  is  nevertheless  true  that  the 
inevitable  and  mechanical  hierarchy  of  the  recipients  of  income 
fulfils,  in  the  economic  phases  that  have  hitherto  prevailed, 
an  eminent  technical  function  not  dissimilar  from  that  which 
is  exercised  in  the  executive  field  by  the  rationally  conceived 
and  purposive  hierarchy  of  the  officials.  In  fact,  as  long  as 
the  association  of  labour  is  coercive,  there  is  indispensable 
need  for  a  concentrated  control  of  economy  and  of  production 
to  effect  the  co-ordination  of  rebelhous  and  naturally  undis- 
ciplined individual  forces  ;  hence  the  hierarchy  of  the  re- 
cipients of  income,  for  the  very  reason  that  it  subjects  the 
general  order  of  economic  relationships  to  a  dictatorial 
oligarchy,  indubitably  fulfils  a  superior  technical  function. 
In  this  manner,  the  coercive  association  of  labour,  at  the  same 
time  that  it  renders  technically  necessary  the  hierarchy  of  the 

1  "  The  result  of  the  concentration  of  wealth  is  that  the  great  mass  of  the 
population  can  progress  only  in  the  manner  prescribed  by  the  initiative  or 
the  caprice  of  a  fraction  of  the  population."  Chiozza-Money,  loc.  cit.,  pp.  127 
and  151. 


3i8  The  Economic  Synthesis 

recipients  of  income,  generates  that  hierarchy  by  giving  rise 
to  the  struggle  between  incomes  ;  that  is  to  say,  the  natural 
process  of  economic  relationships  give  rise,  by  its  own  intrinsic 
force,  to  that  socially  advantageous  result  which  in  other 
fields  of  activity  is  attained  b}^  the  human  will  deliberately 
directed  towards  a  rational  end. 

None  the  less  there  appears  an  essential  difference  between 
the  two  cases.  Whereas  the  hierarchy  of  officials  is  by  nature 
rigid  and  immobile,  that  of  the  recipients  of  income  is  subject 
to  incessant  mutation,  in  consequence  of  the  silent  but  in- 
exorable labour  of  the  struggle  between  incomes.  Now  every 
hierarchy  presents  a  certain  arrangement  of  maximum 
efficiency,  which  being  given,  the  hierarchy  attains  to  the 
production  of  its  greatest  possible  useful  effect ;  whilst  when 
the  arrangement  of  maximum  efficiency  is  surpassed,  there 
occurs,  not  an  increase,  but  a  decrease  of  co-ordinative  power 
and  technical  efficiency. — ^The  hierarchy  of  officials,  for  the 
very  reason  that  it  is  an  institution  voluntarily  planned  to 
effect  the  better  co-ordination  of  individual  forces,  usually 
stops  at  the  normal  limit,  or  at  least  does  not  go  very  far 
beyond  it.^  On  the  other  hand,  the  hierarchy  of  the  recipients 
of  income,  being  the  product  of  the  blind  struggle  between 
incomes,  which  continues  unceasingly  and  without  end,  may 
readily  pass  beyond  the  Hmit  of  maximum  efficiency  to  attain 
a  point  at  which  it  ceases  to  constitute  a  stimulus  to  the 
productive  forces,  and  becomes  an  influence  restraining  their 
elasticity. — ^In  other  words,  the  concentration  of  income, 
whilst  up  to  a  certain  point  technically  advantageous  (because 
it  renders  possible  or  more  easy  the  employment  of  extensive 
instruments  of  production  or  the  institution  of  concentrated 
enterprise),  becomes,  when  this  limit  is  exceeded,  a  check 
upon  the  productive  forces,  and  therefore  an  agent  which 
diminishes  income. 

The  hierarchal  distribution  of  the  recipients  of  income  gives 
rise  to  the  analogous  distribution  of  another  series  of  derivative 
phenomena.    It  is  certain,  for  example,  that  the  recipients  of 

^  This  is  true  only  subject  to  certain  reservations,  for  often  the  state 
enlarges  its  bureaucratic  framework  in  order  to  satisfy  the  demands  of  new 
place-seekers,  or  to  gain  new  defenders  for  the  existing  economic  and  political 
order  (Michels,  Uoligarchia  organica  constituzionale,  "  Riforma  Sociale,'* 
1907,  p.  972). 


The  Distribution  of  Income  319 

income,  as  we  descend  in  the  scale  of  incomes,  discount  bills  of 
exchange  gradually  diminishing  in  value  ;  and  that  therefore 
the  numerical  increase  in  the  recipients  of  income  as  we  pass 
towards  incomes  of  lower  degrees  leads  to  a  corresponding 
increase  in  the  number  of  bills  of  exchange  for  the  smaller 
values.  In  other  words,  the  number  of  bills  of  exchange 
discounted  is  least  in  the  case  of  bills  of  maximum  value, 
and  the  number  increases  as  we  descend  in  the  scale  of  values. — 
The  same  may  be  said  of  protested  bills  of  exchange,  of  savings- 
bank  deposits,  of  forced  expropriations,  of  values  assigned  or 
adjudged  by  decisions  of  the  law-courts  ;  for  all  these  are  more 
numerous  in  proportion  as  the  values  involved  are  smaller. 

Finally,  the  hierarchal  distribution  of  the  recipients  of 
income  inevitably  leads  to  a  hierarchal  arrangement  of 
consumption.  We  have  already  seen  that  the  struggle  between 
incomes  gives  rise  to  a  marked  disparity  between  the  degrees 
of  income,  and  we  now  see  that  the  incomes  of  greatly  increasing 
degree  are  received  by  a  decreasing  number  of  individuals. 
Now,  if  the  recipients  of  average  incomes  consume  these 
chiefly  in  the  purchase  of  average  products,  as  far  distant  from 
bare  necessaries,  on  the  one  hand,  as  from  exceptional  luxuries, 
on  the  other,  the  reduction  of  a  considerable  proportion  of  the 
recipients  of  income  to  incomes  of  a  very  low  figure,  forces  these 
recipients  to  purchase  inferior  products  and  those  of  the  lowest 
price,  whilst  the  correlative  creation  of  incomes  high  in  degree 
but  received  by  few  persons,  enables  these  last  to  consume 
products  of  excessive  cost.  Hence  the  hierarchy  of  the 
recipients  of  income  effects  'per  se  a  differentiation  of  consump- 
tion (and  correlatively  of  production),  leading  to  an  ever 
clearer  separation  between  two  substantially  distinct  zones, 
the  consumption  of  necessaries,  and  the  consumption  of 
luxuries. — ^Now,  since  the  number  of  the  recipients  of  income 
diminishes  more  than  proportionally  to  the  increase  in  their 
incomes,  it  follows  that  the  quantity  of  high-priced  products 
(such  as  are  obtainable  only  b}^  the  recipients  of  the  greater 
incomes)  must  exhibit  towards  the  low-priced  products  a 
numerical  ratio  more  than  inversely  proportional  to  their 
respective  prices.  From  this,  again,  it  results  that  a  technical 
improvement  which  lowers  the  price  of  a  product,  and  thus 
renders  it  accessible  to  the  recipients  of  income  of  a  lower 


320  The  Economic  Synthesis 

degree,  increases  the  demand  for  that  product  to  an  extent 
more  than  proportional  to  the  lowering  of  the  price. ^ 

By  thus  increasing  the  demand  for  products  of  luxury  at  the 
expense  of  the  demand  for  products  of  average  and  necessary 
consumption,  the  hierarchal  arrangement  of  the  recipients  of 
income  creates  and  intensifies  the  disharmony  between  demand 
and  supply  of  income-products  and  of  subsistence-products, 
respectively,  and  the  oscillations  in  their  current  prices. — 
Thus  the  marked  fall  in  the  price  of  wheat  in  Russia  from 
1820  to  1830 — ^that  mysterious  phenomenon  for  the  explana- 
tion of  which  the  Academy  of  Sciences  in  Petersburg  had 
instituted  a  public  competition — ^was  explained  by  Thomin  as 
the  outcome  of  the  increased  inequality  of  incomes,  owing  to 
which,  whilst  some  were  able  to  purchase  high-priced  objects, 
others  were  deprived  of  the  necessaries  of  life.^ 

(6)  Dynamic  Conditions. 

The  distribution  of  income  which  has  been  elucidated  in  the 
preceding  investigations  is  not  immutable,  but  is  subject  on 
the  contrary  to  incessant  changes,  inasmuch  as  the  struggle 
between  incomes  which  generates  this  distribution  is  itself 
unceasingly  restless  and  mutable.  Now  the  first  problem 
which  presents  itself  relates  to  the  social  value  of  the  mutations 
in  the  distribution  of  income  ;  we  have  to  examine  what  is 
the  economic  significance  of  the  mutations  in  the  numerical 
distribution  of  the  recipients  of  income  of  varying  degrees, 
and  to  ascertain  how  far  these  mutations  involve  an  increase, 
and  how  far  a  diminution,  in  social  inequalities. 

In  this  connexion,  at  the  very  outset,  the  most  superficial 
observation  leads  to  a  conclusion  extremely  categorical  and 
precise.  In  fact,  to  speak  of  a  pyramid  is  to  speak  of  in- 
equality ;  hence,  the  more  acute  the  pyramid,  the  more 
marked  is  the  inequality,  and  therewith  the  more  powerful  is 
the  economic  dictatorship  of  the  greater  incomes  ;  whereas 
the  more  obtuse  the  pyramid,  the  less  marked  is  the  inequality. 
Now  the  pyramid  may  be  rendered  more  acute  in  two  different 
ways.     1.  In  the  first  place  this  change  may  be  due  to  an 

*  Dubois-Reymond,  loc.  cit.,  p.  250. 

*  Tugan-Baranowski  [Tlie  Factory  System],  p.  109. 


The  Distribution  of  Income  321 

increase  in  the  quantitative  difference  between  incomes  of 
different  degrees.  Here  it  is  necessary  to  point  out  that  the 
difference  between  incomes  is  not  absolute  merely,  but  is  also 
relative  to  the  entity  of  the  incomes  concerned  ;  for  it  is 
evident  that  a  difference  of  20  involves  a  much  more  notable 
disparity  when  it  exists  between  incomes  of  10  and  of  30 
respectively  than  when  it  exists  between  incomes  of  100  and 
of  120  respectively,  for  in  the  former  case  the  larger  income 
is  200%  greater  than  the  smaller,  whilst  in  the  latter  case  it  is 
only  20%  greater.  2.  In  the  second  place,  the  change  may 
be  due  to  an  increase  in  the  numerical  difference  between  the 
recipients  of  income  of  successive  degrees.  It  follows  that, 
the  numerical  distribution  of  the  recipients  of  income  remaining 
constant,  the  inequality  of  fortunes  is  greater  in  proportion 
as  the  descent  from  degree  to  degree  of  income  is  steeper  ; 
the  difference  between  the  successive  degrees  of  income  re- 
maining constant,  the  more  rapid  is  the  increase  in  the  number 
of  the  recipients  of  income  as  we  descend  in  the  scale,  the 
greater  is  the  inequality  of  fortunes  ;  and  conversely.  Or,  to 
put  the  matter  in  a  different  way,  the  more  extensive  the 
proportional  increase  in  incomes  as  we  rise  in  the  scale,  and 
the  more  extensive  the  increase  in  the  number  of  the  recipients 
of  income  as  we  descend  in  the  scale  of  incomes,  the  more 
marked  the  economic  inequahty  ;  and  conversely.^ 

If  the  number  of  the  recipients  of  income  of  diminishing 
degree  were  simply  inversely  proportional  to  their  incomes, 
every  variation  in  the  numerical  proportion  of  the  recipients 
of  income  of  diminishing  degree  would  "per  se  involve  a  cor- 
responding variation  in  the  proportion  of  the  incomes  of  pro- 
gressive degree,  and  conversely  ;  that  is  to  say,  the  two  factors 
now  under  consideration  would  be  necessarily  interconnected. — 
In  fact,  given  the  equation  : 

N     r; 

it  is  evident  that  every  increase  or  diminution  in  the  first 
term  (representing  the  numerical  ratio  between  the  recipients 
of  income  of  diminishing  degree)  involves  an  increase  or 
diminution  of  the  second  term  (representing  the  numerical 

*  Ancdiait  II,  p.  375,  note. 


322  The  Economic  Synthesis 

ratio  between  the  incomes  of  increasing  degree) ;  and  con- 
versely. But  we  know  that  the  recipients  of  income  of 
diminishing  degree  exhibit  as  to  their  numbers  an  inverse 
ratio  to  the  x^  power  of  their  incomes ;  that  is  to  say,  we  know 
that 

N 


r 
Now  the  first  term  varies  directly  as  —  and  inversely  as  x  ; 

n»'  /  f   \  OS 

because,  the  greater  -,  the  greater,  ceteris  paribus,  is  (  — )  ' 
r  \  ^ 

N 
and  the  greater  therefore  — ^ ;  whilst  the  greater  is  x  the  less  is 

~ )  ,  and  the  less,  therefore,  is  — ^.    It  may,  then,  happen  that 
r  N 

r' 

—  diminishes,  that  is  to  say  that  the  disparity  between  incomes 
r 

N 
increases,  while  — ,  that  is  to  say  the  numerical  ratio  between 

the  recipients  of  income  of  diminishing  degree,  remains  con- 
stant, or  even  increases,  if  meanwhile  x  diminishes.  Con- 
versely, it  may  happen  that  x  increases,  while  the  numerical 
ratio    between    the    recipients    of    income    of    diminishing 

N  .  .  r' 

degree  —  remains  constant  or  even  increases,  if  —  meanwhile 
N'  r 

increases,    that   is  to    say,  the    disparity    between  incomes 

diminishes. — Since    the    inequality    in    the    distribution    of 

incomes  is  in  inverse  ratio  to  the  numerical  proportion  between 

the  recipients  of  income  of  diminishing  degree,  we  may  say 

that  the  inequality  in  the  distribution  of  incomes  may  increase 

or  diminish,  the  disparity  of  incomes  diminishing  or  increasing, 

if  there  occur  meanwhile  an  increase  or  diminution  in  the 

power  X ;  and  the  inequahty  of  incomes  may  increase  or 

diminish,  x  diminishing  or  increasing,  if  there  occur  meanwhile 

an  increase  or  diminution  in  the  disparity  of  incomes. 

If  we  suppose  the  disparity  between  incomes  to  be  constant, 

the  distribution  of  income  is  more  unequal  in  proportion  as  is 

smaller  the  numerical  ratio  between  the  greater  recipients  of 


The  Distribtttion  of  Income  323 

income  and  the  lesser  ;  or,  to  put  the  matter  differently,  in 
proportion  as  is  greater  the  average  number  of  the  recipients 
of  income  which  each  recipient  of  income  has  immediately 
beneath  him. — Hence  every  increase  in  the  numerical  ratio 
between  the  greater  recipients  of  income  and  the  lesser, 
diminishes  the  inequaUty  in  the  distribution  of  income,  and 
conversely.  Now  the  increase  in  the  numerical  ratio  between 
the  greater  recipients  of  income  and  the  lesser,  may  be  ac- 
companied by  an  increase  in  the  absolute  number  of  the 
recipients  of  income,  or  it  may  leave  that  number  unaffected. 
We  may,  for  example,  suppose  that  all  at  once  a  new 
crowd  of  recipients  of  income  is  rained  down  from  the 
skies  with  their  incomes  attached.  If  these  recipients  of 
income  belong  to  the  higher  class,  the  numerical  ratio  between 
the  greater  recipients  of  income  and  those  lower  down  in  the 
scale  increases,  so  that  the  inequaHty  diminishes  ;  in  the 
converse  case,  the  inequaUty  increases.  It  may  happen,  on  the 
other  hand,  that  the  number  of  the  greater  recipients  of 
income  increases  without  any  increase  in  the  total  number 
of  the  recipients  of  income,  simply  by  the  ascent  of  recipients 
of  income  from  the  lower  spheres  ;  and  in  this  case  the 
numerical  ratio  between  the  greater  recipients  of  income 
and  the  lesser,  increases  more  than  in  the  previous  case, 
because  the  number  of  the  lesser  recipients  of  income  does  not 
remain  invariable,  but  diminishes. 

But  in  every  case  the  index  of  the  decrease  or  increase  of  the 
inequality  is  the  increase  or  decrease  of  the  numerical  propor- 
tions between  the  classes  of  the  recipients  of  income  of  diminish- 
ing degree,  and  not  the  absolute  number  of  the  recipients  in 
one  class  or  another,  for  this  taken  by  itself  is  insignificant 
or  ambiguous.  For  example,  the  numerical  increase  of  the 
recipients  of  average  income,  if  due  to  the  descent  into  that 
degree  of  a  part  of  the  greater  recipients  of  income,  involves  a 
diminution  in  the  numerical  ratio  between  the  recipients  of 
incomes  higher  than  the  average  and  the  recipients  of  average 
incomes,  therefore,  in  that  region  of  the  pyramid  there  is  an 
accentuation  of  inequality.  But  if  the  increase  in  the  number 
of  the  recipients  of  income  of  average  degree  is  due  to  the 
ascent  into  that  degree  of  a  part  of  the  recipients  of  income  of 
degrees  below  the  average,  this  involves  an  increase  in  the 


324  The  Economic  Synthesis 

numerical  ratio  between  the  recipients  of  income  of  average 
degree,  and  those  lower  in  the  scale,  so  that  we  have  a  diminu- 
tion of  inequality  in  this  region  of  the  pyramid.  To  express  the 
matter  differently,  if,  as  a  sequel  to  the  numerical  increase  in 
the  recipients  of  average  income,  the  distribution  of  incomes 
presents  always  a  very  pronounced  form  of  pyramid,  this 
means  that  the  increase  in  the  recipients  of  average  income  is 
due  to  the  fall  of  a  part  of  the  greater  recipients  of  income  into 
a  lower  sphere  ;  but  if,  on  the  other  hand,  the  distribution 
of  the  recipients  of  income  approximates  to  the  form  of  a 
binomial  curve,  this  means  that  the  numerical  increase  of  the 
recipients  of  average  income  is  due  to  the  ascent  to  a  higher 
sphere  of  a  part  of  the  recipients  of  income  whose  incomes 
have  been  less  than  the  average  ;  that  is  to  say,  in  the  former 
case,  inequality  has  increased,  whereas  in  the  latter  case  it 
has  dipainished.  It  results  from  these  considerations  that  all 
inferences  drawn  simply  from  the  numerical  increase  of  the 
middle  classes  are  in  fact  erroneous,  for  this  absolute  increase, 
considered  "per  se,  does  not  justify  any  inference  as  to  the 
general  direction  of  the  distribution  of  wealth. 

It  may  further  be  pointed  out  that  changes  in  the  numerical 
ratio  between  the  recipients  of  income  of  two  or  more  successive 
degrees,  may  well  indicate  a  change  in  the  economic  inequaHty 
at  this  particular  level,  but  does  not  in  any  way  exclude  the 
possibility  that  at  other  levels  there  may  have  occurred  a 
change  of  an  altogether  opposite  kind. — ^Let  us  suppose,  for 
example,  that  wealth  becomes  concentrated  in  the  more 
elevated  spheres  of  income,  and  that  this  leads  to  the  ascent  of  a 
part  of  the  recipients  of  income  of  the  degree  immediately 
beneath  the  maximum  into  the  maximum  degree.  This 
change  involves  a  diminution  of  inequality  between  the  maxi- 
mum and  the  sub-maximum  incomes,  for  at  this  level  there 
is  an  exclusive  advantage  to  the  lesser  of  the  two  degrees  of 
income  ;  and  it  involves  an  increase  in  inequaHty  between  the 
sub-maximum  incomes  and  those  lower  down  the  scale,  for  at 
this  level  there  is  an  exclusive  advantage  to  the  income  of  the 
higher  degree.  Now  we  actually  find  that  in  the  maximum 
and  sub-maximum  spheres  of  income,  in  which  the  inequality 
diminishes,  the  numerical  ratio  between  the  greater  and 
the   lesser   incomes   increases ;     whereas    between   the   sub- 


The  Distribution  of  Income  325 

maximum  incomes  and  those  beneath,  where  inequality  is 
accentuated,  the  numerical  ratio  between  the  greater  and  the 
lesser  incomes  diminishes. 

Again,  if  a  part  of  the  recipients  of  average  income  rises  to 
higher  degrees,  the  numerical  ratio  of  the  recipients  of  income 
above  the  average  to  the  recipients  of  income  of  average  degree 
increases  ;  hence  at  this  level  the  pyramid  becomes  attenuated. 
But  if,  whilst  the  recipients  of  income  of  average  degree  thus 
diminish,  the  recipients  of  income  lower  than  average  remain 
constant  in  number,  the  numerical  ratio  between  the  recipients 
of  income  of  average  degree  and  those  who  receive  incomes 
of  less  than  the  average  degree  diminishes,  and  therefore 
at  this  lower  level  the  pjn-amid  becomes  more  acute.  If,  how- 
ever, some  of  the  recipients  of  average  income  are  defeated, 
and  are  precipitated  into  the  sphere  of  the  lower  incomes  or 
into  that  of  the  incomeless,  the  numerical  ratio  between  the 
recipients  of  average  income  and  the  recipients  of  minimal 
income  is  diminished,  or  the  numerical  ratio  between  the 
recipients  of  income  and  the  incomeless  is  diminished,  so 
that  in  the  latter  case  the  region  beneath  the  pyramid  under- 
goes enlargement, — ^Thus,  if  a  crisis  eats  up  the  savings  of  the 
lesser  recipients  of  income  in  order  further  to  enrich  those 
who  are  rich  already,  the  number  of  the  greater  recipients  of 
income  and  of  the  minimal  recipients  of  income  increases  at 
the  expense  of  the  average  recipients  of  income  ;  consequently, 
inequality  diminishes  in  the  upper  region  and  increases  in  the 
lower  region  of  the  pyramid. — In  any  case,  therefore,  the 
increase  in  the  numerical  ratio  between  the  superior  recipients 
of  income  and  the  average  recipients  of  income  attenuates 
economic  inequality  throughout  the  region  between  their 
incomes  ;  but  it  may  be  accompanied  by  a  diminution  in  the 
numerical  ratio  between  the  recipients  of  average  income  and 
those  lower  in  the  scale,  or  between  the  recipients  of  average 
income  and  the  incomeless,  and  in  this  case  inequality  is 
accentuated  in  the  lower  region  of  the  pjTamid,  or  as  between 
the  base  of  the  pyramid  and  the  region  beneath  it.  This  accen- 
tuation, we  must  insist,  is  not  due  simply  to  the  fact  of  the 
ascent  of  certain  recipients  of  income  to  higher  levels  of  income, 
for  this,  at  this  level,  attenuates  the  inequality ;  but  it  is  due 
to  the  fact  of  an  altogether  different  character,  which  is  not  a 


326  The  Econo7nic  Synthesis 

necessary  concomitant,  that  there  does  not  occur  a  contempo- 
raneous ascent  of  certain  recipients  of  the  lowest  income  to  the 
stratum  of  average  income,  or  that  there  does  occur  a  descent 
of  some  of  the  recipients  of  average  income  into  the  sphere  of 
the  lowest  incomes  or  into  that  of  the  incomeless. 

Conversely,  if  the  number  of  the  recipients  of  average  income 
increases  in  consequence  of  the  ascent  of  part  of  the  recipients 
of  income  from  lower  down  the  scale,  the  numerical  ratio  of 
the  recipients  of  average  income  to  the  recipients  of  minimal 
income  increases,  that  is  to  say,  at  this  level  of  the  'pyramid, 
inequahty  is  attenuated.  But  for  the  very  reason  that  there 
occurs  an  increase  in  the  absolute  number  of  the  recipients  of 
average  income,  it  follows  that,  ceteris  paribus,  the  numerical 
ratio  between  the  greater  recipients  of  income  and  the  average 
recipients  of  income  diminishes,  that  is  to  say,  that  at  this 
level  inequality  is  accentuated.  Here,  then,  the  increase  in  the 
numerical  ratio  between  the  recipients  of  average  income 
and  the  recipients  of  minimal  income,  attenuates  economic 
inequality  throughout  the  region  between  their  incomes  ;  but 
for  the  very  reason  that  the  increase  is  arrested  at  this  point, 
because  it  is  not  accompanied  by  the  further  ascent  of  recipients 
of  average  income  to  higher  levels  of  income,  there  results  a 
diminution  in  the  numerical  ratio  between  the  greater  re- 
cipients of  income  and  the  average,  that  is  to  say,  at  this  level 
the  pyramid  becomes  more  acute.  Now  in  this  case  the 
increasing  acuteness  of  the  pyramid  in  the  region  superior 
to  the  average  income  is  not  due  simply  to  the  fact  of  the 
ascent  of  part  of  the  recipients  of  income  from  the  lowest  strata 
to  the  stratum  of  average  income,  but  to  the  fact  ^at  this 
ascent  is  arrested  at  the  average  income  and  goes  no  further. 
Here  also,  then,  the  diminution  in  the  numerical  ratio  between 
the  recipients  of  income  of  a  given  degree  and  those  lower  in 
the  scale  is  always  the  outcome  of  an  arrest  in  the  upward 
progress  of  the  recipients  of  income  ;  and  the  point  at  which 
this  diminution  begins  affords  a  precise  indication  of  the  point 
at  which  is  arrested  the  process  of  equalisation  of  fortunes. 

All  these  considerations  are  true  in  so  far  as  we  assume  to  be 
constant  the  other  factor  of  the  distribution  of  wealth,  or  the 
disparity  between  individual  incomes  of  diverse  degrees  ;  for 
if  this  disparity  changes,  the  influences  due  to  the  numerical 


The  Distribution  of  Income  327 

distribution  of  the  recipients  of  income  may  thereby  be 
accentuated  or  annulled.  For  example,  if  the  number  of  the 
greater  recipients  of  income  increases,  whilst  their  individual 
income  and  the  social  income  remain  constant,  it  is  evident 
that  a  part  of  wealth  must  be  taken  away  from  the  lesser 
recipients  of  income  to  be  transferred  to  the  greater.  Hence 
the  disparity  between  individual  incomes  of  diverse  degrees 
increases,  that  is  to  say,  there  is  an  influence  at  work  which 
annuls  the  equaHsing  influence  of  the  increased  number  of  the 
greater  recipients  of  income.  Conversely,  if  the  number  of  the 
greater  recipients  of  income  diminishes,  whilst  their  individual 
income  and  the  social  income  remain  constant,  this  means  that 
a  mass  of  income  hitherto  accrueing  to  the  greater  recipients  of 
income  is  transferred  to  the  lesser,  and  there  results  from  this 
an  attenuation  in  the  disparity  between  incomes,  annulling  that 
influence  of  the  numerical  diminution  of  the  greater  recipients 
of  income  which  tends  to  increase  ine quality. ^ 

We  may  therefore  conclude  that  a  change  in  the  form  of  the 
pyramid  of  incomes,  rendering  it  more  acute  or  more  obtuse, 
as  the  case  may  be,  is  always  the  reflex  of  a  corresponding 
increase  or  diminution  in  the  inequality  of  the  distribution 
of  wealth ;  that  is  to  say,  the  smaller  the  numerical  ratio 
between  the  recipients  of  income  of  each  degree  to  those 
below  them  in  the  scale,  the  more  unequal  is  the  distribution 
of  wealth.  Now  the  social  pyramid  becomes  more  acute,  or 
more  obtuse,  the  distribution  of  income  more  unequal,  or  more 
equal,  as  the  result  of  a  number  of  influences,  of  which  the 
most  notable  are  the  following  : 

1.  The  Variations  in  the  Form  of  Income. 

We  have  seen  that  in  the  case  of  undifferentiated  income 
the  intensity  of  the  struggle  between  incomes  is  much  less  than 

*  The  following  writers  hold  opinions  contrary  to  those  expounded  in  the 
text  :  Goschen,  The  Increase  of  Moderate  Incomes,  "  Journal  of  the  Statistical 
Society,"  1887,  pp.  593,  et  seq.  Neymarck,  "Journal  de  la  Soci^te  statistique," 
March,  1902,  pp.  151,  et  seq.  Benini,  "  Giomale  degli  econonaisti,"  1897, 
p.  194  ;  Principi  di  Statistica  metodologica  (Bib.  Ec),  pp.  187-9.  Bresciani, 
"Giomale  degli  economisti,"  1905,  p.  117.  Gide,  Principes,  1891,  p.  161. 
Schmoller,  Die  Einkommensvertheilung  in  neuer  und  alter  Zeit,  "  Jahrbuch 
fur  Ges."  1895.  Wolf,  Sozialisnms  und  kapitalistische  Oesdlschaftsordnung, 
Stuttgart,  1892,  pp.  227,  et  seq.  Wagner,  "Zeitschrift  des  preuss.  stat. 
Bureau,"  1904.  Bernstein,  Die  heiUige  Einkommensbewegung  und  die  Aufgabe 
der  Volkswirtschaft,  Berlin,  1902,  pp.  34,  et  seq. 


328  The  Economic  Synthesis 

in  the  case  of  differentiated  income.  Now,  since  the  differentia- 
tion of  incomes  is  an  outcome  of  the  struggle  between  incomes, 
it  follows  that  in  the  case  of  undifferentiated  income,  the 
numerical  increase  of  the  recipients  of  income  as  we  descend 
in  the  scale  of  incomes  must  be  much  less  accentuated  than 
in  the  case  of  differentiated  income. 

2.  TJie,  Variations  in  the  Kinds  of  Income. 

Since,  where  we  have  to  do  with  fluctuating  incomes,  the 
increase  in  the  number  of  the  recipients  of  income  as  we 
descend  in  the  scale  is  more  marked,  it  follows  that  an  increase 
in  fluctuating  incomes,  whether  accompanied  or  not  by  an 
increase  in  the  number  of  the  recipients  of  these  incomes,  must 
accentuate  the  numerical  increase  in  the  recipients  of  income 
as  we  descend  in  the  scale  ;  and  conversely.  The  distribution 
of  the  total  income  is  therefore  more  or  less  differentiated, 
according  as  fluctuating  incomes  or  consoHdated  incomes 
predominate.  If,  then,  the  various  kinds  of  income  correspond 
to  different  degrees  of  income,  the  quantitative  alterations 
in  the  incomes  of  various  kinds  give  rise  to  corresponding 
alterations  in  the  incomes  of  various  degrees,  and  must  be 
classed  among  the  phenomena  we  have  next  to  consider. 

3.  The  Variations  in  the  Degrees  of  Income, 

It  is  evident  that  if,  ceteris  'paribus^  there  occur  an  increase 
in  the  degree  of  the  higher  income  or  a  decrease  in  the  degree 
of  the  lower  income,  there  is  an  increase  in  the  disparity  in  the 
economic  condition  of  the  recipients  of  income,  that  is  to  say, 
in  the  distribution  of  income.  Therefore,  if  a  new  public 
loan  or  an  unforeseen  expansion  of  industry  raises  the  rate 
of  interest,  as  occurred  in  January,  1907,  in  the  London 
market,  where  capital  advanced  on  mining  securities  received 
as  much  as  14%  interest,  the  income  of  superior  degree  in- 
creases ;  if  the  payment  of  the  interest  on  the  public  debt 
is  effected  by  the  yield  of  an  indirect  tax  which  falls  upon  the 
minor  recipients  of  income,  the  lower  incomes  are  diminished  ; 
hence  the  disparity  between  incomes  increases,  and  the  dis- 
tribution of  income  becomes  more  unequal.     And  the  opposite 


The  Distribution  of  Income  329 

result  would  be  attained  by  the  conversion  of  national  debt,  or 
by  the  immunity  from  taxation  of  the  lesser  incomes. 

A  change  in  the  disparity  between  incomes  of  various 
degrees,  however,  while  it  has  a  direct  influence  in  increasing 
or  diminishing  inequality,  has  not  "ptr  se  any  necessary  in- 
fluence in  changing  the  numerical  ratio  between  the  recipients 
of  income  at  different  levels  in  the  scale  ;  it  follows  directly 
from  this  that  the  number  of  the  recipients  of  income  of 
various  degrees  no  longer  exhibits  the  former  ratio  to  the 
entity  of  their  respective  incomes,  and  this  ratio  may  no  longer 
be  unique  and  determinate.  But  the  change  in  the  disparity 
between  incomes  indirectly  modifies  the  numerical  distribution 
of  the  recipients  of  income.  The  greater,  in  fact,  the  disparity 
between  incomes  of  different  degrees,  the  greater  is  the  in- 
tensity of  the  struggle  between  incomes  of  higher  degree, 
and  the  greater  therefore  the  reduction  in  the  number  of  the 
recipients  of  income  of  higher  degree.  On  the  other  hand,  the 
greater  the  excess  of  the  higher  incomes  over  those  beneath 
them  in  the  scale,  the  more  intense  is  the  struggle  between 
incomes  of  different  degrees,  and  the  greater  therefore  is  the 
number  of  the  recipients  of  income  (the  maximum  excepted) 
who  are  overthrown  by  that  struggle.  Here  we  have  a  twofold 
reason  for  a  diminution  in  the  numerical  ratio  between  the 
higher  recipients  of  income  and  those  beneath  them  in  the 
scale.  This  is  evident  from  a  yery  simple  arithmetical 
consideration.  In  fact,  the  rise  in  the  higher  incomes, 
ceteris  paribus,  diminishes  the  fraction  expressing  the  ratio 
between  two  incomes  of  lower  and  higher  degree  ;  whereas, 
when  the  struggle  between  incomes  of  different  degrees 
becomes  more  acute,  there  is  an  increase  in  the  power  to  which 
this  same  fraction  must  be  raised  in  order  to  obtain  the 
numerical  ratio  between  the  recipients  of  two  incomes  of 
higher  and  lower  degree  ;  thus  there  is  at  work  a  twofold 
influence  to  diminish  the  figure  expressing  the  numerical  ratio 
between  the  recipients  of  income  of  diminishing  degree. 

Thus,  if  up  till  now  there  have  been  tw^o  incomes,  100  and  60 
respectively,  the  numerical  ratio  between  the  recipients  of  the 
two  incomes  will  be  (-f^-^f'  If,  now,  there  ensue  an  increase  in 
all  the  incomes  higher  than  50,  so  that,  for  example,  the  income 
100  rises  to  120,  the  numerical  ratio  between  the  two  groups 


330  The  Economic  Sy^tthesis 

of  recipients  of  income  (assumed  always  to  be  inversely 
proportional  to  the  ratio  between  their  incomes  raised  to 
the  cc*^  power)  becomes  for  this  reason  (y\%)*'  that  is,  it  is 
diminished.  But,  with  the  increase  in  the  disparity  between 
the  incomes  of  different  degrees,  there  ensues  an  increase  in 
the  intensity  of  the  struggle  between  them,  and  this  increases 
the  value  of  x,  for  this  value  depends  upon  the  intensity  of 
the  struggle  between  incomes  of  various  degrees  ;  and  with 
this  increase  in  the  value  of  x  there  follows  a  further  accentua- 
tion in  the  numerical  inferiority  of  the  superior  recipients  of 
income. 

4.  The  Variations  in  the  Quantity  of  the  Total  Income. 

An  increase  in  the  quantity  of  the  total  income,  in  so  far  as 
it  takes  the  form  of  an  equal  increase  in  all  the  incomes, 
diminishes  the  relative  disparity  between  incomes  of  different 
degrees,  and  therefore  per  se  attenuates  inequality. — ^There  are 
additional  ways  in  which  an  increase  in  the  total  income 
produces  a  like  result.  If  the  measure  of  the  successive  degrees 
of  income  remains  constant,  and  if  there  is  no  change  in  the 
numerical  ratio  between  the  recipients  of  income  of  successive 
degrees,  an  increase  in  the  quantity  of  the  total  income  is  a 
necessary  and  sufficient  cause,  either  of  a  rise  in  the  minimum 
income,  or  of  an  increase  in  the  numerical  ratio  between  the 
recipients  of  income  of  one  degree  and  of  the  degree  next 
beneath  in  the  scale,  or  of  both  these  together  ;  that  is  to  say, 
on  this  account,  the  inequality  of  fortunes  is  attenuated.  When 
we  consider  the  matter  closely,  we  see  that  we  have  here  an 
elementary  arithmetical  truth,  or  rather  a  tautological  state- 
ment. In  reality  if,  the  other  elements  remaining  constant, 
the  minimal  income  increases,  this  very  fact  implies  that  the 
sum  of  all  the  incomes  above  the  minimum  (by  hypothesis 
remaining  unvaried),  together  with  the  now  increased  minimum 
income,  becomes  larger,  that  is  to  say,  the  total  income  in- 
creases. In  such  conditions,  the  increase  in  the  minimum 
income  is  equivalent  to  the  increase  in  the  total  income,  nor 
can  the  former  increase  without  an  increase  in  the  latter.  In 
other  words,  the  increase  in  the  total  income  is  a  necessary 
condition  of  the  increase  in  the  minimum  income.  On  the 
other  hand,  if  the  total  income  increases  while  the  incomes 


The  Distribution  of  Income  331 

above  the  minimum  remain  constant,  it  is  perfectly  clear 
that  the  increase  in  the  total  income  can  be  effected  only  by  an 
equivalent  increase  in  the  minimum  income  ;  that  is  to  say, 
in  the  supposed  case,  the  increase  in  the  total  income  neces- 
sarily and  'per  se  impHes  an  increase  in  the  minimum  income, 
or  the  former  is  a  sufficient  condition  of  the  latter. 

But  it  is  no  less  evident  and  tautological  that  the  increase 
in  the  total  income  is  a  necessary  and  sufficient  condition  of 
an  increase  in  the  numerical  ratio  between  the  recipients  of 
income  of  one  degree  and  of  the  degree  next  beneath.  In  fact, 
according  as  there  occurs  an  increase  in  the  numerical  ratio 
between  the  recipients  of  income  of  a  given  degree  and  those 
of  the  degree  next  beneath  in  the  scale,  it  is  necessary  that  a 
part  of  these  latter  should  have  annexed  a  new  mass  of  income 
enabling  them  to  rise  to  the  sphere  of  income  next  above  ; 
and  this,  if  all  the  other  elements  be  supposed  constant,  cannot 
occur  without  an  increase  in  the  total  quantity  of  income. 
Thus,  an  increase  in  the  total  quantity  of  income  is  the  neces- 
sary condition  of  an  increase  in  the  numerical  ratio  between 
the  higher  recipients  of  income  and  the  lower. — But  I  say  more 
than  this  ;  I  say  that  the  increase  in  the  total  quantity  of 
income,  supposing  that  there  exists  identity  of  numerical 
ratio  between  the  recipients  of  income  of  diminishing 
degrees,  and  supposing  the  minimum  income  to  remain 
constant,  is  a  sufficient  reason  why  the  numerical  ratio  of  the 
recipients  of  income  of  each  degree  to  the  recipients  of  income 
of  the  degree  next  beneath  in  the  scale  increases.  In  fact,  an 
increase  in  the  total  income,  if  the  minimum  income  remains 
constant,  necessarily  involves  an  increase  in  the  mass  of  income 
received  by  some  group  of  recipients  of  an  income  above  the 
minimum  ;  that  is  to  say,  it  involves  the  ascent  of  a  part  of  the 
recipients  of  income  of  this  degree  to  a  higher  degree  ;  that  is 
to  say,  it  involves  an  increase  in  the  numerical  ratio  between 
the  recipients  of  income  of  this  higher  degree  and  the  recipients 
of  income  next  beneath  in  the  scale.  But  since  the  numerical 
ratio  between  the  recipients  of  income  of  two  successive  degrees 
is  by  hjrpothesis  equal  for  all  the  degrees  of  income,  it  follows 
that  what  occurs  of  any  two  successive  degrees  of  income 
must  occur  throughout  the  scale  ;  and  therefore  that  the 
number  of  the  recipients  of  income  of  each  degree  must  increase 


332  The  Econojnic  Synthesis 

relatively  to  the  number  of  the  recipients  of  income  of  the 
degree  next  beneath  in  the  scale.  Therefore  the  increase  in  the 
total  income  necessarily  brings  it  about  that  the  ratio  of  the 
recipients  of  income  of  each  degree  to  those  of  the  next  degree 
beneath  in  the  scale  increases  ;  that  is  to  say,  the  increase  in 
the  total  income  is  "ptr.  se  a  sufl&cient  condition  of  the  diminution 
in  the  inequaHty  of  fortunes.^ 

If,  then,  we  suppose  that  the  increase  in  the  total  income 
raises  to  the  income  next  higher  in  the  scale  an  equal  quantity 
of  the  recipients  of  income  of  the  various  degrees,  we  find  that 
each  of  the  groups  of  the  recipients  of  income  of  the  various 
degrees  loses,  in  consequence  of  the  ascent  of  a  part  of  its 
members  to  the  degree  next  above  in  the  scale,  exactly  as  much 
as  it  gains  by  the  absorption  of  a  part  of  the  recipients  of 
income  from  the  degree  next  beneath  in  the  scale — if  we  except 
the  recipients  of  income  of  minimum  degree,  who  lose  with- 
out any  corresponding  gain,  and  the  recipients  of  income 
of  maximum  degree  who  gain  without  any  corresponding  loss. 
Therefore  the  number  of  the  recipients  of  income  of  maximum 
degree,  and  the  ratio  of  these  to  those  beneath,  increases  ;  the 
number  of  the  recipients  of  income  of  minimum  degree  and 
the  ratio  of  these  to  those  above,  diminishes  ;  whilst  all  the 
other  groups  remain  unchanged  in  number  ;  that  is  to  say, 
the  numerical  ratio  between  the  successive  groups  of  the 
recipients  of  income,  whilst  remaining  constant  in  the  case  of 
the  central  groups,  is  changed  as  regards  the  ratio  between 
these  and  the  recipients  of  income  of  maximum  and  of 
minimum  degree. 

Apart  from  these  purely  arithmetical  influences,  the  varia- 
tions in  the  quantity  of  the  total  income  exercise  certain  purely 
economic  influences  to  bring  about  changes  in  the  numerical 
distribution  of  the  recipients  of  income. — We  have  seen,  in  fact, 
that  an  increase  in  the  total  quantity  of  income  has  a  twofold 
influence,  accentuating,  on  the  one  hand,  and  attenuating, 
on  the  other,  the  struggle  between  incomes,  but  that  the 
second  of  these  influences  is  regularly  stronger  than  the  first ; 
it  follows  that  the  net  outcome  of  an  increase  in  the  total 

*  If  Pareto  {Cours,  II,  p.  320)  affirms  that  these  conclusions  can  be  demon- 
strated only  by  the  aid  of  mathematics,  this  proves  that  the  abuse  of 
spectacles  renders  the  wearer  unable  ifO  read  with  the  naked  eye. 


The  Distrihition  of  Incojne  333 

income  is  an  attenuation  of  the  struggle  between  incomes. 
Now,  the  rise  in  the  total  income,  by  attenuating  the  struggle 
between  incomes,  diminishes  the  numerical  increase  in  the 
recipients  of  income  as  we  descend  in  the  scale  of  incomes,  or 
increases  the  numerical  ratio  between  the  recipients  of  income 
of  each  degree  and  those  of  the  degree  next  beneath  in  the 
scale ;  that  is  to  say,  it  mitigates  the  inequahty  of  fortunes. 
Conversely,  everything  that  diminishes  the  total  income 
increases  the  rate  of  increase  in  the  recipients  of  income  as 
we  descend  in  the  scale,  or  increases  the  inequality  of  fortunes. 
Hence,  all  the  facts  which  directly  or  indirectly  bring  about  a 
diminution  in  the  total  income,  such  as  the  operation  of  the 
law  of  diminishing  returns  from  land,  an  increase  in  subsist- 
ence, commercial  crises  or  industrial  depressions,  protection, 
income  tax,  or  taxation  of  luxuries,  exercises  an  indirect  in- 
fluence in  accentuating  the  numerical  increase  in  the  recipients 
of  income  as  we  descend  in  the  scale. 

Nor  is  this  all.  In  the  case  of  differentiated  income,  an 
increase  in  the  quantity  of  total  income,  by  attenuating  the 
struggle  between  incomes,  diminishes  the  proportion  of  the 
recipients  of  income  who  are  precipitated  into  the  sphere  of  the 
incomeless  ;  whilst,  by  favouring  an  increase  in  subsistence,  it 
increases  the  proportion  of  the  labourers  who  rise  into  the 
class  of  the  recipients  of  income  ;  hence  there  is  at  work  a 
twofold  influence,  whereby  an  increase  in  the  total  income 
increases  the  numerical  ratio  of  the  recipients  of  income 
to  the  incomeless. 

5.  Tht  Variations  in  the  Quantity  of  Subsistence, 

In  the  fkst  place,  these  variations  modify  the  numerical  dis- 
tribution of  the  recipients  of  income,  by  the  very  fact  that  they 
induce  a  change,  in  the  inverse  direction,  in  the  total  mass  of 
income  ;  and  this  falls  under  the  heading  last  considered.  Inde- 
pendently of  this,  however,  a  rise  in  subsistence  intensifies  the 
struggle  between  subsistence  and  income,  and  is  especially  in- 
jurious to  the  lesser  and  the  medium  recipients  of  income,  leading 
to  the  fall  of  many  of  these  into  lower  spheres.  Hence  an  in- 
crease in  subsistence  leads  to  an  advance  in  the  rate  of  numerical 
increase  in  the  recipients  of  income  as  we  descend  in  the  scale, 
that  is  to  say,  it  accentuates  economic  inequality ;  and  con- 


334  The  Economic  Synthesis 

versely.  On  the  other  hand,  a  rise  in  subsistence  leads  to  the 
ascent  of  a  part  of  the  labourers  into  the  class  of  the  recipients 
of  income,  thereby  increasing  the  numerical  ratio  between 
these  and  the  incomeless  ;  that  is  to  say,  in  this  respect  the 
increase  in  subsistence  attenuates  inequaUty. 

6.  The  Variations  in  the  Quantity  of  the  Population. 

We  have  previously  seen  that  an  increase  in  the  population, 
even  if  there  be  a  proportional  increase  in  capital  and  in 
agricultural  produce,  renders  the  struggle  between  incomes 
more  intense.  Now,  inasmuch  as  the  numerical  increase  in  the 
recipients  of  income  as  we  descend  in  the  scale  of  incomes  is 
proportionally  more  rapid  according  as  the  struggle  between 
incomes  is  more  intense,  it  follows  that  an  increase  in  the  popu- 
lation, by  the  very  fact  that  it  effects  an  intensification  of  the 
struggle  between  incomes,  increases  the  inequahty  of  fortunes. 
— ^If  population  increases  in  greater  or  in  less  proportion  than 
capital,  there  results  a  diminution  or  an  increase  in  the  figure  of 
subsistence,  the  indirect  influence  of  which  (as  we  have  just 
said)  is  to  attenuate  or  to  accentuate  the  numerical  increase 
in  the  recipients  of  income  as  we  descend  in  the  scale. — Hence 
a  diminution  in  the  birth-rate,  or  an  increase  in  the  death-rate, 
or  emigration,  by  increasing  individual  subsistence,  intensifies 
the  struggle  between  subsistence  and  income,  and  therewith 
accentuates  the  numerical  increase  in  the  recipients  of  income 
as  we  descend  in  the  scale  ;  whilst  the  inverse  phenomena 
have  the  opposite  effect. 

But  if  we  suppose  the  average  birth-rate  and  the  other 
demographic  factors  to  remain  constant,  the  numerical  increase 
in  the  recipients  of  income  as  we  descend  in  the  scale  undergoes 
modification  by  reason  of  the  varying  birth-rate  among  the 
recipients  of  income  of  different  degrees.  It  is  well  knowTi 
that  among  the  greater  recipients  of  income  the  birth-rate  is 
less  :  it  may  be  because  they  marry  heiresses,  belonging  ipso 
facto  to  comparatively  infecund  families  ;  it  may  be  because 
the  dissipated  hfe  of  their  wives  impairs  the  procreative  power 
of  these  ;  it  may  be  (as  Maurel  contends)  because  unduly 
luxurious  feeding  induces  arthritism,  gout,  and  infertiHty ; 
it  may  finally  be  (if  we  except  the  recipients  of  maximum 


The  Distribution  of  Income  335 

income  who  are  exempt  from  all  troubles  of  this  nature)  because 
they  are  afraid  of  splitting  up  their  property  among  several 
heirs.  Therefore,  leaving  the  recipients  of  maximum  income 
out  of  consideration,  the  fertihty  of  recipients  of  income  is 
inversely  proportional  to  their  incomes. — ^Moreover,  it  is 
statistically  established  that  those  recipients  of  income  who 
fall  into  a  lower  sphere  of  income,  exhibit  a  sudden  increase 
in  their  birth-rate,  which  becomes  approximated  to  the  average 
birth-rate  of  the  lower  classes.  Nor  is  this  all,  for  the  major 
recipients  of  income,  in  addition  to  having  a  lower  birth-rate, 
exhibit  an  ever-increasing  preponderance  of  female  births  over 
male,  which  leads,  sooner  or  later,  to  an  extinction  of  the  male 
line. — ^Finally,  the  lower  marriage  rate  of  the  superior  recipients 
of  income,  the  sons'  predecease  of  their  parents  which  in- 
evitably manifests  itself  at  a  certain  moment  in  the  life  of  the 
more  wealthy  stocks,  and  other  solvent  influences  which  high 
income  of  itself  originates,  lead  to  a  very  noteworthy  result — 
namely,  the  more  or  less  rapid  extinction  of  the  classes  of  the 
superior  recipients  of  incomes.^ 

Now,  all  these  phenomena  have  the  most  significant  influence 
in  modifying  the  numerical  distribution,  it  may  be  of  the 
consumers  of  income,  it  may  be  of  the  recipients  of  income. 
In  the  first  place,  the  inverse  ratio  between  the  entity  of  the 
income  and  the  fertiHty  of  the  recipients  of  income,  has  as  its 
primary  result  the  fact  that  the  income  immediately  received 
by  its  holder  is  actually  enjoyed  in  use  by  an  ever  smaller 
number  of  individuals  in  proportion  as  the  degree  of  the  income 

1  In  this  respect  the  researches  of  Fahlbeck  as  to  the  Swedish  nobility  are 
extremely  valuable.  This  writer  shows  that  the  frequency  of  celibacy,  the 
greater  and  greater  delay  of  the  marriage  of  the  males,  the  high  and  increas- 
ing proportion  of  sterile  marriages,  the  low  and  diminishing  birth-rate  (now 
15*4  per  1000)  always  lower  than  the  death-rate,  and  which  imdergoes  a 
sudden  rise  only  in  those  famiUes  (from  one-eighth  to  one-tenth  of  the  whole) 
who  fall  into  the  lower  strata  of  society,  the  increasing  preponderance  of 
female  birtlis,  and  finally  the  increasing  mortality  of  the  males  less  than 
twenty  years  of  age,  or  the  sons'  predecease  of  their  parents,  which  invariably 
tends  to  appear  in  the  noble  class,  depress  the  average  life  of  the  noble  fami- 
lies beneath  that  of  the  families  of  the  lower  classes.  It  follows  from  this 
that  76%  of  the  original  noble  families  are  now  extinct,  and  that,  notwith- 
standing the  continued  ennoblement  of  bourgeois  families,  there  is  no  increase, 
but  rather  a  decline,  in  the  number  of  noble  famiHes.  Fahlbeck  is  careful  to 
add  that  all  this  applies  with  equal  force  to  the  whole  wealthy  class,  of  which 
the  titular  nobility  is  merely  a  fragment  {Der  Adel  Schwedens,  Jena,  1903, 
pp.  51,  74,  et  seq.). — Analogous  researches  in  England  lead  to  the  same  con- 
clusion. 


336  The  Econo7nic  Synthesis 

is  higher.  It  is  true  that  a  high  income,  while  diminishing  the 
birth-rate,  simultaneously  diminishes  the  death-rate,  and  that 
the  second  fact  serves,  at  least  in  part,  to  counteract  the 
influence  exercised  by  the  first  in  diminishing  the  number  of 
the  consumers  of  the  greater  incomes.  Since,  however,  the 
fall  in  the  death-rate  encounters  far  more  immediate  and 
peremptory  Hmitation  than  the  fall  in  the  birth-rate,  it 
follows  that  the  inhibitory  influence  of  the  diminished  birth- 
rate of  the  major  recipients  of  income  invariably  makes  itself 
felt.  Hence  the  number  of  consumers  of  the  greater  incomes 
exhibits  a  ratio  to  the  number  of  consumers  of  the  lesser 
incomes  which  is  lower  than  the  ratio  between  the  number 
of  major  and  the  number  of  minor  recipients  of  income  ;  that 
is  to  say,  the  consumers  of  income  of  different  degrees  are 
distributed  according  to  a  pyramid  far  more  accentuated  than 
that  which  represents  the  distribution  of  the  holders  of  the 
said  incomes  ;  and  the  disparity  between  the  incomes  per  head 
of  different  degrees  is  much  greater  than  the  disparity  between 
the  corresponding  incomes  per  family.  It  follows  from  this, 
that,  as  the  pyramid  representing  the  recipients  of  income 
becomes  more  acute,  the  pyramid  representing  the  consumers 
of  income  of  diminishing  degrees  becomes  more  acute  to  a 
greater  extent.  It  follows,  also,  that  the  increase  in  the 
disparity  between  the  degrees  of  income,  by  accentuating  the 
disparity  between  the  birth-rates  among  the  recipients  of 
income  of  different  degrees,  has  as  its  result  that,  in  the  case 
of  the  consumers  of  income,  the  increase  in  their  numbers 
as  we  descend  in  the  scale  is  more  rapid  than  the  increase  in  the 
numbers  of  the  corresponding  recipients  of  income  ;  hence  it 
follows  that  the  disparity  between  the  incomes  per  head  of  the 
various  degrees  is  proportionately  greater  than  the  disparity 
between  the  corresponding  incomes  per  family. 

Moreover,  the  greater  female  birth-rate  in  the  higher 
classes  has  a  marked  effect  in  diminishing  the  numerical 
ratio  between  the  recipients  of  income  of  higher  degree  and 
those  beneath  them  in  the  scale.  In  fact,  since  the  available 
income  of  one  member  of  a  married  pair  is  equal  to  half  the 
income  received  by  the  two  in  common,  it  follows  that  an 
individual  who  receives  a  given  income  and  marries  one  in 
receipt  of  a  lesser  income,  descends  by  this  very  fact  to  a  lower 


The  Distribution  of  Income  337 

degree  of  income.  Now,  in  the  group  of  the  higher  recipients 
of  income,  the  females  born  in  excess  of  males  must  necessarily 
mate  with  males  who  receive  incomes  of  lower  degree,  that  is 
to  say,  they  must  abandon  the  higher  income  to  descend  to 
income  of  lower  degree.  From  this  it  follows  that  the  number 
of  recipients  of  greater  income  undergoes  diminution  while 
the  number  of  recipients  of  lesser  income  increases,  in  contrast 
with  what  would  happen  if  the  female  births  were  equal  in 
number  to  the  male  births.^ 

This  result  is  greatly  aggravated  by  the  process  of  progressive 
extinction  to  which  is  subject  the  stock  of  the  greater  recipients 
of  income  ;  and  this  gives  rise  in  a  twofold  manner,  direct  and 
indirect,  to  an  increasing  acuteness  in  the  pyramid  of  the  re- 
cipients of  income. — It  is,  in  fact,  evident  that  the  extinction  of 
a  part  of  the  families  enjoying  the  higher  incomes,  and  the 
consequent  annexation  of  their  wealth  by  the  remaining 
families,  diminishes  the  number  of  the  greater  recipients  of  in- 
come, and  simultaneously  raises  the  figure  of  their  individual 
incomes,  increasing  therefore  the  disparity  between  these  in- 
comes and  those  beneath  them  in  the  scale  ;  this,  by  intensify- 
ing the  struggle  between  the  incomes  of  higher  degree,  and  also 
that  between  these  and  the  lesser  incomes,  increases  the  number 
of  the  recipients  of  income  who  fall  into  lower  spheres  of  income, 
and  increases  therewith  the  numerical  ratio  between  the  lesser 
recipients  of  income  and  the  greater.  There  is  thus  at  work 
a  twofold  series  of  influences  to  render  the  pyramid  of  the  re- 
cipients of  income  more  acute  at  its  vertex,  and  wider  at  its  base, 
determining — ^for  the  reasons  given  above — ^that  the  pyramid 
representing  the  consumers  of  income  of  diminishing  degrees 
becomes  yet  more  acute  in  form. — In  this  way  a  number  of 
interacting  demographic  influences  tends  to  bring  about  a 
progressive  reduction  in  the  number  of  the  recipients  of 
greater  income  as  compared  with  the  number  of  the 
recipients  of  average  or  of  small  income,  and  thus  to 
render  ever  more  accentuated  the  pyramid  of  the  recipients 
of  income. 

^  Unquestionably  the  same  effect  would  result  if  there  occurred  in  the 
upper  classes  an  excess  of  male  births  over  female  births  ;  and  the  phenomenon 
indicated  in  the  text  can  bo  avoided  only  by  a  numerical  equality  in  the 
birth-rate  of  males  and  of  females. 


338  The  Economic  Synthesis 


7.  The  Action  of  the  State. 

Finally,  the  action  of  the  State  exercises  a  certain  influence 
in  modifying  the  numerical  distribution  of  the  recipients  of 
income.  Thus  it  is  certain  that  the  various  provisions  we 
have  previously  considered  whose  aim  it  is  to  raise  or  to  rein- 
force the  minor  incomes,  and  correlatively  to  depress  the 
major,  attenuate  more  or  less  sensibly  the  numerical  increase 
in  the  recipients  of  income  as  we  descend  in  the  scale.  Con- 
versely, privileges  conceded  to  the  great  incomes,  labour 
legislation,  which  is  often  a  sentence  of  death  to  the  small  and 
medium  manufacturers,  and  regressive  taxation,  bring  about  an 
increase  in  the  large  incomes  to  the  detriment  of  the  small, 
thus  tending  to  invert  the  pyramid  of  the  recipients  of  income. 
It  is  certain  that  the  "  pohtics  of  income  "  (EinkommenspoUtik) , 
as  laws  of  this  character  are  pompously  called,  whose  aim  it  is 
to  effect  a  change  in  the  distribution  of  income  either  in  the 
aristocratic  or  in  the  democratic  direction,  effect  a  correlative 
modification  in  the  hierarchy  of  the  recipients  of  income. 

If  we  now  proceed  to  ask  what  is  the  ultimate  outcome  of  all 
the  influences  hitherto  analysed,  or  whether  in  the  course  of 
economic  evolution  the  numerical  distribution  of  the  recipients 
of  income  tends  to  become  more  or  less  unequal,  it  will  not  be 
difficult,  after  all  that  has  been  said,  to  find  the  answer.  The 
very  struggle  between  incomes,  proceeding  without  pause, 
continually  increases  the  share  of  the  total  income  which  is 
agglomerated  in  the  incomes  of  high  degree,  thus  accentuating 
the  disparity  between  individual  incomes,  accentuating,  that 
is  to  say,  the  primary  factor  of  economic  inequality. — On  the 
other  hand,  the  incessant  progress  of  the  struggle  between 
incomes  accentuates  ever  more  and  more  the  progressive 
numerical  reduction  in  the  recipients  of  income  as  we  ascend 
in  the  scale,  therewith  rendering  inequality  more  acute. 
There  is  superadded  to  this,  in  the  production  of  the  same 
result,  the  fact  that  the  struggle  between  incomes  tends  to 
become  more  acute  in  the  successive  forms  of  income.  Such 
is  the  obvious  outcome  of  these  considerations.  It  results, 
in  fact,  from  what  has  been  said,  that,  whenever  we  pass  from 


The  Distribution  of  Income  339 

undifferentiated  to  differentiated  income,  the  numerical  in- 
crease in  the  recipients  of  income  as  we  descend  in  the  scale 
becomes  more  acute.  Therefore  the  formation  of  capitaHst 
property  leads  'per  se  to  an  aggravation  of  economic  inequality. 
But  every  successive  phase  of  differentiated  income,  rendering 
ever  greater  the  predominance  of  incomes  derived  from  movable 
property  (among  which  are  included  the  fluctuating  incomes) 
over  the  incomes  derived  from  immovable  property  (which 
are  normally  consolidated),  increasing  the  disparity  between 
incomes,  increasing  subsistence,  and  therewith  rendering 
more  intense  the  struggle  between  subsistence  and  income 
which  is  injurious  to  the  minor  recipients  of  income,  increasing, 
finally,  the  total  number  of  the  recipients  of  income  and  the 
density  of  the  population — renders  necessarily  more  acute  the 
numerical  increase  in  the  recipients  of  income  as  we  descend 
in  the  scale.  Finally,  the  extinction  of  an  increasing  proportion 
of  the  recipients  of  income  of  the  superior  groups,  by  further 
increasing  the  disparity  between  incomes,  also  intensifies  the 
struggle  between  incomes,  and  therewith  accentuates  the 
numerical  increase  in  the  recipients  of  income  as  we  descend 
in  the  scale.  It  follows  that,  in  each  successive  form  of  income, 
the  distribution  of  the  recipients  of  income  tends  to  become 
ever  more  unequal. 

Recalling,  however,  what  was  previously  demonstrated,  that 
the  numerical  increase  in  the  recipients  of  income  as  we  descend 
in  the  scale  of  incomes  is,  ceteris  paribus,  inversely  proportional 
to  the  quantity  of  the  total  income,  it  must  now  be  added  that, 
in  any  one  form  of  income,  the  numerical  increase  in  the 
recipients  of  income  as  we  descend  in  the  scale  of  incomes 
exhibits  two  clearly  distinct  phases  ;  inasmuch  as  this  increase 
tends  to  become  attenuated  during  the  ascendent  phase  of  in- 
come, in  which  the  quantity  of  the  total  income  is  increasing, 
whilst  it  becomes  very  markedl}^  accentuated  in  the  inevitably 
succeeding  phase  of  decline,  in  which  the  total  mass  of  income 
gradually  diminishes.  Hence,  considering  the  whole  series  of 
the  successive  forms  of  incomes,  we  may  conclude  that  the 
numerical  increase  in  the  recipients  of  income  as  we  descend 
in  the  scale  of  incomes  becomes  accentuated  whenever  the 
income  ascends  to  a  superior  form,  undergoes  gradual  attenua- 
tion (remaining  always  at  a  more  elevated  level  than  in  the 


340  The  Economic  Synthesis 

preceding  phase  of  income)  during  the  ascendent  phase  of  this 
superior  form,  to  become  once  more  accentuated  during  the 
subsequent  phase  of  decHne.^  Finally,  since  we  have  seen 
that  in  the  case  of  differentiated  income  the  numerical  ratio 
between  the  recipients  of  income  and  the  incomeless  is  directly 
proportional  to  the  total  quantity  of  income,  we  are  led  to  the 
conclusion  that,  in  the  ascendent  phase  of  each  form  of  differ- 
entiated income  the  numerical  ratio  between  the  recipients  of 
income  and  the  incomeless  tends  necessarily  to  increase,  whilst, 
in  the  inevitably  successive  phase  of  decline  in  the  quantity 
of  the  total  income,  that  ratio,  on  the  other  hand,  progressively 
diminishes. 

This  conclusion  affords  the  most  decisive  condemnation 
of  the  thesis  of  Marx,  according  to  which  the  progressive 
reduction  in  the  number  of  the  recipients  of  income  consequent 
on  the  struggle  between  incomes  will  be  the  essential  factor 
leading  to  the  ultimate  destruction  of  the  capitahst  economy. 
The  theory  is  well  known.  Just  as,  according  to  Darwin,  the 
struggle  between  organisms  unequally  endowed,  by  leading 
to  the  survival  of  the  fittest,  gives  rise  to  the  organic  evolution 
of  gradually  ascendent  forms,  so  also,  according  to  Marx,  the 
struggle  between  incomes  quantitatively  diverse,  by  leading 
to  the  progressive  reduction  in  the  number  of  the  recipients  of 
income,  gives  the  impulse  to  the  economic  evolution  of  the 
capitalist  system  to  the  higher  coUectivist  form.  Now,  it  is  clear 
at  the  first  glance  that  to  the  struggle  between  incomes,  a  con- 
stant and  customary  phenomenon  in  all  periods  of  ascent  or  of 
decline  of  income,  we  cannot  reasonably  attribute  any  such 
revolutionary  influence.  For  if,  in  the  periods  of  the  decHne  of 
income,  the  struggle  between  incomes  becomes  more  intense, 
and  if,  in  consequence  of  this,  economic  inequality  becomes 
more  marked  and  there  occurs  a  reduction  in  the  number  of  the 
recipients  of  income,  this  implies  that  the  accentuation  of  the 
struggle  between  incomes,  the  increase  of  inequality,  and  the 
reduction  in  the  number  of  the  recipients  of  income,  presuppose 
the  decline  of  the  income,  and  therefore  cannot  be  the  cause 
of  that  decline.  Thus  the  sequence  of  the  phenomena  is  the 
absolute  reverse  of  that  which  is  indicated  bj-  Marx.    What 

*  Thus  are  corrected  the  considerations  expounded   in  the  Cost.  ec.  od.y 
p.  750.    See  also  Ibid.,  p.  745. 


The  Distribution  of  Income  341 

happens  is,  not  that  the  accentuation  of  the  struggle  between 
incomes  leads  to  the  decHne  and  to  the  dissolution  of  the 
income  ;  but  that  a  series  of  factors  bound  up  with  the  very 
structure  of  every  form  of  income,  leads,  at  a  certain  point, 
to  its  decline,  and  that  this  decline  intensifies  the  struggle 
between  incomes,  and  renders  the  social  pyramid  more  acute. 
Undoubtedly,  the  accentuation  of  the  proportional  increase 
in  the  number  of  the  recipients  of  income  as  we  descend  in  the 
scale  of  incomes,  and  the  numerical  reduction  in  the  recipients 
of  income,  which  are  thus  brought  about,  may  proceed  to  the 
point  at  which  they  impose  restrictions  upon  the  productive 
forces,  and  lead  to  a  further  decline  in  income  ;  but  it  is  none 
the  less  true  that  the  decline  of  income  is  ever  the  primary 
phenomenon^  whilst  the  accentuation  in  the  inequahty  between 
the  recipients  of  income  and  the  reduction  in  their  number  are 
no  more  than  derivative  and  secondary  phenomena  resulting 
from  that  decline. 

The  numerical  distribution  of  the  recipients  of  income 
changes,  not  only  in  time,  but  also  in  space  ;  that  is  to  say,  the 
distribution  of  the  recipients  of  income  differs,  not  merely 
in  a  single  country  at  dijfferent  times,  but  also  in  different 
countries  at  one  and  the  same  time.  In  fact,  the  predominance 
of  incomes  from  movable  property',  the  disparity  between  in- 
comes, the  figure  of  subsistence,  the  number  of  the  recipients 
of  income,  and,  in  a  word,  all  the  determinants  of  the  numerical 
differentiation  of  the  recipients  of  income,  exhibit  themselves 
in  a  more  intense  degree  in  the  more  advanced  countries. 
These  countries,  therefore,  will  normally  present  a  more  marked 
increase  in  the  number  of  the  recipients  of  income  as  we  descend 
in  the  scale  of  incomes  ;  and,  cor  relatively,  will  exhibit  a  more 
sensible  mitigation  of  this  increase  during  the  ascendent 
periods  of  income,  and  a  more  marked  accentuation  of  this 
increase  during  the  declining  periods  of  income.  And  since  the 
countries  industrially  more  evolved  are  those  in  which  the 
productivity  of  land  on  the  margin  of  cultivatioil  is  least 
(because  the  coercion  to  the  association  of  labour  is  less  intense 
and  therefore  the  productive  forces  exhibit  a  greater  freedom 
and  elasticity),  it  follows  that  we  may  generally  infer  that  the 
intensity  of  the  inequality  normally  present  in  the  different 
countries  in  the  matter  of  the  distribution  of  income,  and 


342  The  Economic  Synthesis 

the  greater  or  less,  positive  or  negative,  variations  in  that  in- 
equality, will  be  indirectly  proportional  to  the  fertility  of  the 
lands  under  cultivation  in  these  respective  countries. 

The  previous  considerations  suffice  for  the  categorical  con- 
demnation of  a  theory  dominant  to-day,  which  affirms  that 
the  pjnramidal  distribution  of  the  recipients  of  income  is 
bound  up  with  immutable  and  irreducible  conditions  of 
human  nature,  and  more  particularly  that  it  depends  upon 
inborn  differences  in  individual  capacity.  If,  indeed,  we 
classify  a  sufficiently  large  number  of  individuals  in  accordance 
with  their  respective  mental  capacities,  we  see  that  their  dis- 
tribution is  represented  by  a  binomi  al  curve,  or  by  a  hyperbola ; 
for  smallest  of  all  is  the  number  of  individuals  endowed  with 
maximum  ability,  while  there  is  a  gradual  increase  in  the 
number  as  we  pass  to  individuals  whose  ability  is  less,  until 
we  reach  the  average  degree  of  ability,  where  is  assembled  the 
maximum  number  of  individuals  ;  when  we  pass  below  this 
level  of  ability,  the  number  of  individuals  once  more  gradually 
diminishes,  and  this  diminution  continues  as  we  descend  in 
the  scale  of  ability,  until  at  length  we  reach  the  level  of  minimal 
ability,  that  of  the  idiots,  whose  number  is  almost  as  small  as 
that  of  the  geniuses.  Now,  it  is  the  contention  of  these  writers 
that  the  distribution  of  men  classified  according  to  their  wealth 
is  represented  by  the  same  curve.  They  contend  that  if  we 
observe  a  sufficiently  large  number  of  individuals,  we  find  that 
the  recipients  of  the  maximum  incomes  are  very  few  in  number, 
and  that  as  we  descend  in  the  scale  of  incomes  the  number 
of  recipients  gradually  increases  until  we  reach  the  average 
income,  at  which  level  there  is  a  maximum  number  of  holders ; 
whilst  below  this  level,  as  we  descend  in  the  scale  of  incomes, 
the  number  of  recipients  progressively  decreases  until  we 
attain  to  the  recipients  of  minimum  income,  who  are  almost 
as  few  in  number  as  the  recipients  of  maximum  income. — 
Now,  these  writers  conclude,  this  precise  paralleHsm  between 
the  distribution  of  income  and  that  of  ability  suffices  "per  se 
to  prove  that  one  is  nothing  more  than  the  outcome  of  the 
other ;  that  is  to  say,  that  men  attain  to  an  income  more  or  less 
extensive  by  producing  it,  or  by  making  use  of  the  greater  or 
less  mental  capacity  with  which  they  are  endowed  by  nature. 


The  Distribution  of  Income  343 

It  need  hardly  be  said  that  this  doctrine  is  agreeable  to  the 
powerful  and  to  the  rich,  since  it  affords  the  much  needed 
justification  for  their  enormous  incomes. 

Now  there  is  a  great  deal  to  be  urged  against  this  doctrine. 
First  of  all,  the  alleged  paralleHsm  between  these  two  curves 
representing  income  and  ability  in  no  way  authorises  the  con- 
clusion that  the  incomes  are  a  product  of  abihty  and  pro- 
portional thereto,  for  we  might  just  as  well  infer  the  precise 
opposite,  namely,  that  abiHty  depends  upon  income. — Besides, 
for  the  parallehsm  between  the  two  curves  to  estabHsh  in  any 
way  the  dependence  of  income  upon  abiHty,  it  would  be 
necessary  to  show  that  the  individuals  who  are  assembled  at 
various  points  of  the  curve  which  represents  incomes  are  'pre- 
cisely  those  who  occupy  analogous  positions  in  the  curve  which 
represents  abiHty.  Now  this  proof , it  need  hardly  be  said,is  given 
and  can  be  given  by  no  one ;  and  in  its  absence  the  two  curves 
remain  devoid  of  all  significance  in  relation  to  our  problem. 

In  reality,  however,  this  forced  analogy  between  the  two 
curves  respectively  representing  ability  and  income  does  not 
exist ;  for  the  recipients  of  income  gradually  diminishing  in 
degree  are  distributed,  not  in  accordance  with  a  binomial  curve, 
but  in  accordance  with  a  pyramid.  Hence,  there  is  an  identity 
of  distribution  between  the  first  half  of  the  series  of  incomes, 
as  we  proceed  from  the  maximum  income  to  the  average 
income,  and  the  corresponding  half  in  the  series  of  abiHties : 
but  as  soon  as  we  pass  below  the  average  income  and  the 
average  ability,  and  proceed  gradually  downwards  to  the 
respective  minima,  the  two  series  of  incomes  and  of  abilities 
diverge  in  the  most  absolute  manner ;  for  whereas  the  number 
of  individuals  endowed  with  a  diminishing  degree  of  abiHty 
below  the  average  is  a  diminishing  one,  the  number  of  in- 
dividuals who  receive  a  diminishing  amount  of  income  below 
the  average  is  an  increasing  one.  Whereas,  therefore,  abiHty 
is  distributed  in  accordance  with  the  binomial  curve  of  which 
the  middle  portion  represents  the  maximum  density ;  income 
is  distributed  according  to  the  first  half  of  a  binomial  curve, 
of  which  the  middle  portion  approximately  represents  the 
average  density.  In  view  of  these  considerations,  how  is  it 
possible  to  speak  of  any  analogy  whatever  between  the  two 
series  ? 


344  The  Economic  Synthesis 

Let  us  admit,  however,  that,  at  the  outset,  abiHties,  Hke 
income,  are  distributed  in  accordance  with  a  pyramid.  Even 
on  this  hypothesis,  a  coincidence  between  the  degree  of  income 
and  the  intellectual  level  of  its  recipients  can  exist  only  at  the 
initial  instant  of  development,  and  must  speedily  disappear  ; 
for  the  struggle  between  incomes  soon  leads  to  the  fall  of  a  part 
of  the  recipients  of  income  of  a  high  degree,  and  therefore 
endowed  by  hj^othesis  with  high  ability,  to  a  sphere  of  in- 
come lower  in  the  scale,  which  latter  sphere  thus  necessarily 
comes  to  consist  of  individuals  whose  respective  abiHties  vary 
greatly  in  degree. 

Moreover,  the  very  fact  of  the  fatal  impoverishment  of  the 
heirs  of  the  owners  of  property,  and  that  of  the  lucky  ascent 
of  the  children  of  the  poor  into  the  zone  of  the  recipients  of 
income — do  not  these  suffice  "per  se  to  disprove  any  possible 
connexion  between  income  and  ability  ?  If,  in  fact,  the  greater 
recipients  of  income  are  what  they  are  thanks  to  their  superior 
mental  capacity,  it  is  difficult  to  understand  how  this  capacity 
is  used  up  in  a  single  generation,  and  is  not  indefinitely  trans- 
mitted from  generation  to  generation. 

If,  moreover,  the  lesser  recipients  of  income,  or  the  income- 
less,  owe  their  position  to  their  inferior  capacity  or  to  their 
degenerate  condition,  it  is  absolutely  incomprehensible  why 
theu'  children  should  suddenly  acquire  the  superior  qualities 
which  are  lacking  to  the  parents,  and  which  alone  can  launch 
the  children  on  the  way  to  the  conquest  of  fortune.  On  this 
doctrine,  therefore,  the  rotation  of  classes  appears  absolutely 
inexpHcable.  As  soon,  however,  as  we  recognise  that  income 
is  altogether  unrelated  to  the  capacity  of  the  recipients  of 
income,  that  it  is  not  an  attribute  of  persons  but  an  emanation 
of  things,  we  can  readily  understand  how  a  change  in  objective 
conditions  may  transfer  income  from  its  actual  recipients  to 
others,  and  the  perennial  rotation  of  the  recipients  of  income 
thus  immediately  becomes  expHcable  and  perfectly  rational. 

Again,  if  the  numerical  distribution  of  the  recipients  of 
income  were  in  any  way  the  outcome  of  the  distribution  of 
abihty,  it  ought  to  present  an  absolute  and  immutable  con- 
stancy, corresponding  to  the  absolute  constancy  in  the  distribu- 
tion of  intellectual  aptitudes  in  different  times  and  places. 
But,  as  we  have  seen,  the  numerical  distribution  of  the  re- 


The  Distribution  of  Income  345 

cipients  of  income  exhibits  the  most  marked  oscillations,  in 
correspondence  with  every  qualitative  and  quantitative 
change  in  income,  in  the  total  number  of  the  recipients  of 
income,  and  in  the  population,  and  this  fact  peremptorily 
contradicts  the  speciously  simple  doctrine,  that  the  economic 
hierarchy  is  the  exclusive  outcome  of  the  mental  hierarchy. 

For  the  refutation  of  this  doctrine,  however,  it  suffices  to 
study  the  origins  of  individual  capitalised  properties.  We 
learn  from  this  study  that  the  acme  of  financial  wealth  is 
attained,  not  thanks  to  superior  mental  capacity,  but  simply 
by  the  most  infamous  wiles  and  machinations,  that  it  is  not 
the  index  of  heroism  or  of  glory,  but  that  it  bears  the  unclean 
stamp  of  baseness  and  infamy.  ^ 

1  In  this  connexion  consult  the  following  :  An  Appeal  to  our  MiUioiuiireB, 
"  North  American  Review,"  1906,  p.  810.  Jenks,  Great  Fortunes,  the  Winning^ 
the  U8in{j,  New  York,  1906,  pp.  41-2.  Russell,  Lawless  Wealth,  pp.  272,  et  seq. 
Anna  Youngmati,  The  Fortune  of  John  Jacob  Astor^  "  Jom-nal  of  Political 
Economy,"  1908.     Lawson,  Frenzied  Finance,  London,  1906,  pp.  282,  et  seq. 


CHAPTER  VII 

REVOLUTIONS  OF  INCOME 

We  saw  in  the  fifth  chapter  that  in  every  form  of  the  coercive 
association  of  labour,  or  of  the  income  which  emanates  there- 
from, the  productivity  of  labour  describes  a  parabola.  In  fact, 
in  the  ascendent  phase  of  the  income,  wherein  the  positive 
influences  of  the  coercive  association  of  labour  are  predominant, 
in  the  phase,  that  is  to  say,  characterised  by  the  increasing 
efficiency  of  labour,  the  productivity  of  this  last  exhibits  a 
progressive  increase  ;  whereas  in  the  declining  phase  of  the 
income,  wherein  the  negative  influences  of  the  coercive  associa- 
tion of  labour  are  predominant,  in  the  phase,  that  is  to  say, 
wherein  are  most  potent  the  restrictions  which  the  coercion  im- 
poses upon  the  efficiency  of  labour,  the  productivity  of  labour 
exhibits  a  progressive  diminution.  Further,  in  the  sixth  chapter 
it  was  shown  that  this  decHne  in  the  productivity  of  coercively 
associated  labour  is,  in  addition,  accentuated  in  consequence 
of  the  limits  imposed  upon  production  by  the  struggle  between 
incomes  and  by  the  pyramidal  distribution  of  the  recipients  of 
income.  Now  the  diminution  which  thus  manifests  itself  in 
the  productivity  of  coercively  associated  labour,  does  not  take 
the  form  of  a  diminution  of  subsistence,  which  is  commensurate 
to  the  product  of  isolated  labour  (or,  if  inferior  to  this,  is  not 
easily  reducible),  but  appears  as  a  diminution  of  income  ; 
income,  therefore,  during  the  decHning  period  of  every  economic 
form,  is  subject  to  an  inevitable  regression. 

The  decline  thus  arising  in  the  productivity  of  coercively 
associated  labour  weakens  the  income  that  is  founded  upon 
associated  labour,  and  therefore  diminishes  its  power  of  attack 
upon  the  income  that  is  founded  upon  isolated  labour.  The 
consequence  is  that  a  part  of  the  income  founded  upon  isolated 
labour,  which,  in  the  normal  conditions  of  the  coercive  associa- 
tion of  labour,  cannot  persist,  or  can  nowise  flourish,  because 

346 


Revolutions  of  Income  347 

it  is  suppressed  by  its  economic  environment,  now  persists 
and  flourishes  as  the  technical  efficiency  of  the  coercive 
association  of  labour  declines.  Thus,  whilst  a  part  of  the 
income  founded  upon  associated  labour  is  overwhelmed,  a  new 
income  founded  upon  isolated  labour  makes  its  appearance. 
Nor  is  this  all,  for  isolated  labour,  notwithstanding  its  intrinsic 
productive  inefficiency,  may  now  come  to  produce  an  income 
equal  to,  or  even  relatively  greater  than,  that  produced  by 
coercively  associated  labour  in  its  weakened  and  degenerate  con- 
dition ;  so  that  far  from  being  overcome  by  the  competition  of 
the  income  from  coercively  associated  labour,  the  income  from 
isolated  labour  increases  at  the  other's  expense.  In  correlation 
with  this  process  of  contraction  undergone  by  the  coercive  as- 
sociation of  labour,  or  as  a  mental  reflex  therefrom,  there  occurs 
an  increase  in  the  doctrinal  criticism  of  the  income  founded 
upon  the  coercive  association  of  labour,  and  in  such  periods  of 
disintegration  this  criticism  attains  to  its  greatest  violence. 

Indeed,  all  the  forms  of  the  coercive  association  of  labour,  as 
soon  as  their  decline  sets  in,  present  with  marvellous  regularity 
the  significant  phenomenon  of  the  resurrection  of  isolated 
labour,  which  then  suddenly  emerges  from  the  shade,  or  from 
the  state  of  sporadic  manifestation  to  which  it  was  condemned 
during  the  ascendent  phase  of  the  income,  to  assume  at  one 
bound  a  prominent  and  dominant  position.  Thus  the  com- 
munist economy,  when  its  sun  is  setting,  gradually  breaks  up, 
at  first  at  its  confines  and  then  more  and  more  extensively,  so 
that  it  ultimately  becomes  parcelled  out  into  a  multitude  of 
discrete  petty  properties.  Even  clearer  is  the  evidence  of  this 
phenomenon  at  the  close  of  the  slave  economy ;  for  in  classical 
antiquity,  as  in  modern  America,  slave  enterprise,  having 
become  incapable  of  furnishing  a  sufficient  product,  undergoes 
dissolution,  and  is  immediately  replaced  by  a  multitude  of 
petty  properties,  belonging  to  the  former  slaves  now  freed,  or 
to  the  former  slave-owners  now  impoverished.  The  same  phe- 
nomenon manifests  itself  at  the  close  of  the  feudal  economy ; 
for  this,  having  come  to  suffer  from  the  Hke  irreparable  lack 
of  productive  force,  finally  breaks  up  into  a  multitude  of 
dissociated  petty  properties  or  of  independent  crafts. 

The  same  phenomenon  manifests  itself  in  our  own  time, 
although  as  yet  to  a  limited  extent.    Of  late  years,  in  fact,  since 


348  The  Economic  Synthesis 

the  decline  in  income  has  set  in  in  all  civihsed  countries,  there 
begins  to  be  noted  a  reappearance  of  peasant  proprietorship 
and  small  industries,  which  during  the  ascendent  period  of  the 
income  had  been  altogether  overwhelmed  by  the  concentration 
of  production.  Thus,  in  Denmark  it  is  observed  that  small 
proprietorship  in  land  furnishes  a  larger  product  than  is 
furnished  by  great  estates,  the  former  rising  to  the  figure 
nowhere  else  attained  of  37-3  hectolitres  of  wheat  per  hectare.^ 
The  researches  of  Jensen  show  that  in  Denmark  small  culture 
(which,  however,  does  not  necessarily  coincide  with  isolated 
labour)  is  more  intense,  yields  a  larger  proportion  of  forage, 
sustains  a  comparatively  larger  quantity  of  cattle,  and,  finally, 
yields  a  larger  net  income  per  hectare  ;  for  the  income  of 
estates  under  great  culture  is  L115,  of  those  under  medium 
culture  L122-50,  and  of  those  under  small  culture  L168-75. 
In  Germany,  too,  the  income  per  hectare  is  inversely  pro- 
portional to  the  size  of  the  estate,  being  for  estates  of 

Hectares.  Marks. 

3-6  675-65 

5-10  501-85 

10-15  414-46 

15-30  399-05 

more  than  30  380-30^ 

In  Germany  we  find,  moreover,  that  agricultural  progress  is 
limited  to  the  estates  of  the  small  proprietors,^  and  that  in 
proportion  as  culture  becomes  more  intensive,  the  replacement 
of  the  great  culture  by  the  smaU  becomes  an  inevitable  neces- 
sity.* We  may  go  even  further,  and  point  out  that  in  England, 
hitherto  the  classical  land  of  great  estates,  the  small  cultivator 
makes  head  against  the  great,  the  number  of  large  estates 
declines,  while  the  number  of  small  estates  increases,  especially 

*  Giglioli,  Malessere  agrario  ed  alimentare  in  Italia,  Portici,  1904,  p.  34. 
This  does  not  conflict  with  what  was  stated  earlier  in  this  work  (p.  155),  that 
the  product  per  hectare  is  greater  on  the  larger  estates  ;  for  this  applies  to 
ascendent  periods,  not  to  periods  of  decline. 

^  Laur,  Volksioirtschajtliche  Einkommen,  etc.,  p.  240. 

3  Bulgakoff  [Capitalism  and  Agriculture'],  Petersburg,  1900,  I,  p.  126. 

*  Consult  David,  Sozialismus  und  Landudrtschaft,  Berlin,  1903,  pp.  415, 
656,  et  seq. — a  work  all  the  more  worthy  of  note  in  that  the  writer  is  a  socialist 
who  finds  himself  forced  in  this  matter  to  dissent  from  the  dogmas  of  his 
party. — In  the  same  sense  writes  Vandervelde,  Le  socialisme  agraire,  Paris, 
1908,  pp.  80,  et  seq.,  121,  138,  et  seq. — The  same  phenomena  are  seen  in  Holland 
("  Jahrbijcher,  N.  CE.,"  1907,  p.  558). 


Revolutions  of  Income  349 

in  the  agricultural  counties^ ;  so  that  Haggard,  as  the  outcome 
of  a  careful  and  profound  study  of  the  rural  conditions  of  his 
native  land,  comes  to  the  conclusion  that  England  cannot  escape 
from  her  present  difficulties,  nor  restore  her  depopulated  and 
exhausted  lands,  except  by  the  introduction  and  generahsation 
of  peasant  proprietorship.  ^ 

In  this  way,  each  form  of  the  coercive  association  of  labour, 
after  having  endowed  labour  with  a  productivity  superior  to 
that  of  dissociated  labour,  comes,  in  consequence  of  the  in- 
creasing limitations  imposed  upon  production  by  this  verj'' 
coercion,  gradually  to  decline  in  productivity,  thus  tending 
more  and  more  to  lose  its  advantage  over  dissociated  labour  ; 
at  a  certain  point,  therefore,  dissociated  labour  reappears,  and 
reacquires  importance  and  dominion,  inaugurating  a  period  of 
crises  and  universal  disaggregation.  ^  But  dissociated  labour, 
although  in  exceptional  circumstances  it  may  produce  an 
income,  cannot  in  the  long  run  produce  more  than  the  labourer's 
subsistence.  Hence  the  renascence  of  dissociated  labour 
imposes  upon  the  producer  a  condition  of  weakness  and 
impotence,  which  'per  se  paves  the  way  for  the  reappearance  of 
associative  coercion. — ^Thus  the  coercive  association  of  labour, 
temporarily  dissolved,  is  sooner  or  later  reconstituted ;  but  this 
reconstitution  is  effected  in  a  superior  form,  imposing  less  rigid 
restrictions  upon  the  efficiency  of  labour,  and  therefore  capable 
of  giving  a  product  more  considerable  than  that  which  was 

1  Number  of  Estates  from  Number  of  Estates  of 

Year.  50  to  SOO  acres.  800  acres  and  upwards. 

1885  144,288  19,361 

1905  150,561 17,918 

("  Jahrbiicher,"  1907,  p.  241). 
«  Haggard,  Rural  England,  II,  p.  575.    In  the  same  sense  :   Hahn,  loc.  cit., 
pp.  422,  565-8  ;   Shad  well,  Indv^trial  Efficiency,  London,   1906,  II,  p.   455  ; 
Thompson,  Journal  St.  Soc,  1907,  p.  611. 

»  "  Vico's  theory  of  '  recurrence  '  is  no  more  than  a  presentiment  of  that 
fatal  day  in  which  the  field  of  nature  will  be  exhausted  and  in  which  there 
will  ensue  a  period  of  decadence,  to  give  place  in  its  turn  to  a  new  enlargement 
of  the  field  of  natiu-e,  to  be  once  more  followed  by  a  period  of  decadence, 
when  the  field  of  nature  shall  have  been  wholly  occupied.  The  doctrine  of 
the  end  of  the  world,  which  is  to  be  found  in  a  number  of  religions,  is  merely 
the  presentiment  of  the  disaster  that  will  ensue  when  the  whole  field  of  nature 
shall  have  been  occupied."  Ferrara,  Lezioni  di  econ.  pol.,  I,  p.  228. — The 
lamentations  of  St.  Cyprian  upon  the  decrepitude  and  exhaustion  of  the  world, 
and  those  of  Latimer  upon  universal  ruin,  are  no  more  than  the  echo  of  these 
phenomena  of  social  decomposition,  which  manifest  themselves  in  dissimilar 
forms,  yet  always  characterised  by  essential  analogy,  at  the  close  of  the 
classical  and  of  the  medieval  economy. 


350  The  Economic  Synthesis 

obtained  by  the  preceding  form  of  coercively  associated  labour. 
Thus  by  a  twofold  process  of  dissolution  and  recomposition,  or, 
more  concisely  expressed,  of  revolution,  of  income,  there  is 
effected  that  natural  evolution  of  the  economy  to  forms 
continually  less  restrictive,  or  ever  more  efficient,  of  the  coercive 
association  of  labour,  or  of  income,  whose  main  outhnes  have 
been  traced  in  an  earlier  chapter.  ^  But  the  ultimate  outcome 
of  this  evolution  is  to  produce  a  form  of  income  which  furnishes 
the  maximum  product  obtainable  by  coercively  associated 
labour.  Now,  at  this  point  it  becomes  impossible  to  repair  the 
deficiency  in  product  and  in  income  by  instituting  a  superior 
form  of  the  coercive  association  of  labour — for  no  such  form 
exists.  At  this  point,  the  necessity  for  increasing  the  pro- 
ductivity of  associated  labour  involves  the  necessity  for  in- 
stituting, not  now  a  further  form  of  the  coercive  association  of 
labour,  which  is  inadmissible,  but  the  free  association  of  labour, 
which  is  endowed  with  a  higher  productivity  for  the  very  reason 
that  it  is  immune  from  the  restrictive  influences  of  coercion. 

The  coercive  association  of  labour  represents  a  significant 
technical  advance  upon  dissociated  labour,  or  upon  the  isolated 
and  anarchical  production  which  is  the  corollary  of  dissociated 
labour.  But  the  coercive  element  involved  in  such  association 
imposes  upon  production  and  upon  income  a  series  of  pro- 
gressive restrictions  which,  under  the  stress  of  the  increase  in 
population,  ultimately  result  in  the  destruction  of  the  prevailing 
form  of  the  coercive  association  of  labour,  or  of  the  form  of 
income  thereon  based.  As  long  as  the  coercive  association  of 
labour  is  susceptible  of  amehorative  transformations,  the 
influences  restrictive  of  production,  and  ultimately  leading  to 
the  destruction  of  the  particular  form  of  income,  do  not 
eventuate  in  the  disappearance  of  the  coercive  association  of 
labour,  but  only  in  its  transformation — they  result,  that  is  to  say, 
in  the  replacement  of  the  existing  form  of  coercive  association 
by  a  more  productive  or  superior  form.  But  when  the  series 
of  degrees  of  productivity  of  which  the  coercive  association  of 
labour  is  susceptible  has  been  completely  traversed,  when  the 
productivity  of  coercively  associated  labour  has  at  length 
attained  to  its  maximum,  the  constitutional  antagonisms  with- 

1  P.  121,  ei  aeq. 


Revolutions  of  Income  351 

in  the  prevailing  form  of  the  coercive  association  of  labour, 
which  lead  to  the  ruin  of  that  form,  being  unable  to  replace  it 
by  a  more  efficient  form  of  the  coercive  association  of  labour 
(since  no  such  form  exists),  must  necessarily  replace  it  by  the 
free  association  of  labour,  since  this  last  alone  offers  an  advance 
upon  the  form  which  has  to  be  replaced.  At  this  point,  there- 
fore, we  no  longer  have  to  do  with  a  revolution  in  the  coercive 
association  of  labour,  but  with  its  inevitable  destruction. — 
The  time  has,  in  fact,  at  length  arrived  for  the  overthrow 
of  that  age-long  and  all-powerful  giant  by  whom  has  been 
dominated  the  whole  history  of  the  human  race,  and  fort  he 
establishment  of  a  lasting  and  equitable  organism,  that  of  the 
free  association  of  labour,  which  henceforward  can  alone 
represent  a  superior  form  of  production  and  of  economy. — 
Since,  moreover,  we  have  seen  that  differentiated  income 
is  always  founded  upon  the  coercive  association  of  labour, 
whereas  undifferentiated  income  may  be  based  either  upon 
coercive  or  upon  spontaneous  association,  it  follows  that  at 
this  point  it  becomes  inevitable  to  institute  undifferentiated 
income ;  that  is  to  say,  undifferentiated  income  is  by  inevit- 
able necessity  the  final  form  of  economy.  ^ 

It  is  a  notable  fact  that  the  increase  in  population,  at  the  very 
same  time  that  it  renders  necessary  the  transformation  of  the 
coercive  association  of  labour  into  the  spontaneous  association, 
creates  the  possibility  of  effecting  this  transformation,  and 
thus  provides  together  with  the  problem  the  means  for  its 
solution.  It  will  not  have  been  forgotten  that  the  coercion  to 
the  association  of  labour  is  the  result  of  that  degree  of  fertility 
of  the  soil  given  which  the  labourer  can  obtain  a  subsistence, 
and  nothing  more,  by  means  of  isolated  labour  alone  ;  for  the 
existence  of  this  degree  of  fertility  'per  se  excludes  the  fact 
that  he  will  be  induced  to  associate  his  labour  spontaneously 
with  that  of  other  producers,  whilst  at  the  same  time  it 
renders  him  economically  weak,  and  therefore  unable  to 
resist  a  coercively  associative  process.  Now,  as  population 
increases,  and  thus  renders  necessary  the  cultivation  of  land 
which  is  less  and  less  productive,  the  product  of  isolated  labour 

*  It  is  hardly  necessary  to  add  that  undifferentiated  income  is  susceptible 
of  greater  complexity  and  variety,  and  is  therefore  compatible  with  the  more 
advanced  stages  of  economic  evolution. 


352  The  Economic  Synthesis 

continually  diminishes,  until  it  at  length  falls  below  the  amount 
necessary  to  provide  a  bare  subsistence  for  the  producer.  At 
this  point  the  unavoidable  necessities  of  life  at  length  lead  the 
producers  to  associate  their  labour  spontaneously  ;  at  this 
point,  that  is  to  say,  there  appears  for  the  first  time  the 
possibhty  of  effecting  the  spontaneous  association  of  labour. 

The  various  examples  of  the  spontaneous  association  of  labour 
which  are  found  to  have  existed  in  former  days  (although, 
as  we  have  seen,  as  regards  the  examples  commonly  adduced, 
spontaneity  existed  merety  in  appearance)  were  probably 
due  to  the  exceptional  manifestation  of  Hmited  productivity 
of  the  soil,  whereby  the  product  of  isolated  labour  was  depressed 
below  what  was  necessarj^  for  the  subsistences  of  the  producers.^ 
Apart,  however,  from  such  retrospective  considerations,  we 
find  that  this  phenomenon  manifests  itself  already  to  some 
degree  in  our  own  days,  owing  to  the  declining  productivity 
of  the  land.  Assuredly,  the  reluctance  to  the  association  of 
labour,  in  every  country  of  the  globe,  is  even  now  tenacious,  and 
almost  invincible.  Thus,  in  Sicily,  the  lack  of  an  associative 
spirit  proves  an  obstacle  to  the  creation  of  agricultural  co- 
operative societies,  and  leads  to  the  dissolution  of  those  which 
have  with  difficult}-  been  founded ^  ;  in  Ireland  the  movement 
for  the  diffusion  of  co-operation  and  for  the  creation  of  free 
associations,  initiated  in  the  year  1889,  proves  a  failure,  and 
this  failure  is  attributed  by  contemporary  writers  to  the 
insurmountable  obstacle  encountered  in  the  resistance  of  the 
agricultural  classes,  who  are  supposed  to  be  dominated  by  "  the 
individualism  characteristic  of  the  Celtic  races."  Similarly, 
an  English  writer  speaks  of  the  anti-co-operative  inclinations 
of  the  English,  dependent  upon  their  individuaHst  sentiment^  ; 
whilst  a  French  writer  tells  us  that  there  is  little  incHnation 
to  the  practice  of  association  among  his  co-nationals,  who 

*  This  consideration  suffices  to  explain  the  fact  pointed  out  by  Cherbuliez 
{Riche  et  pauvre,  Paris,  1840,  p.  252),  that  periods  of  anarchy  are  characterised 
by  a  sudden  manifestation  of  the  spirit  of  association  ;  for  such  periods  corre- 
spond to  the  appearance  of  a  notable  attenuation  in  the  productivity  of  the 
land. 

*  Lorenzoni,  Relazione  cit.,  pp.  63,  77. — The  same  thing  happens  in 
Russia  in  the  case  of  consumers'  co-operative  societies  (Totomianz,  "  Russ- 
kaja  Mussl.,"  July,  1906,  p.  139). 

3  Devine,  Agricultural  Credit  Societies  ;  cf.  "  Jahrbiicher  N.  CE.,"  1906, 
p.  762. 


Revolutions  of  Income  353 

would  die  rather  than  come  to  an  understanding  with  their 
competitors.  1  Of  late  years,  however,  'pari  passu  with  the 
decline  in  the  productivity  of  the  land,  there  have  germinated 
in  the  most  diverse  regions  of  the  globe  forms  of  spontaneous 
association,  embryonic  indeed  and  imperfect,  but  such  as 
were  inconceivable  or  unknown  in  former  times.  It  is  a  very 
noteworthy  fact,  that  those  forms  of  economic  organisation 
which  in  this  respect  best  approximate  to  the  spontaneous 
association  of  labour,  such  as  consumers'  co-operative  societies 
and  co-operative  credit  associations,  are  most  frequent  to-day 
in  those  countries  in  which  the  density  of  the  population  is 
greatest  and  the  fertility  of  the  soil  is  least.  This  fact  is  dis^ 
played  by  the  following  table  : 

One  consumprn'  One  co-operative 

co-operative  society  for  credit  association  for 

Country.  inhabitants  numbering  the  same. 

Russia  226,575  172,700 

Holland    71,878  — 

Italy     62,306  50,000 

France 42,528  55,640 

Germany  36,899  4,800 

Austria 33,548  9,700 

England    24,496  ~ 

.    Switzerland 9,819  — 

Denmark 2,325  14,000* 

The  most  superficial  examination  of  these  figures  shows 
that  the  frequency  of  consumers'  co-operative  societies  and  of 
co-operative  credit  associations  is  least  in  countries  that  are 
sparsely  populated  and  where  the  fertihty  of  the  land  is  high, 
greater  in  thickly  populated  countries  and  in  those  in  which 
the  land  is  less  fertile,  and  maximal  (at  least  so  far  as  con- 
sumers' co-operatives  are  concerned)  in  the  country  in  which 
the  natural  fertility  of  the  soil  is  minimal,  Denmark.  In 
Ireland,  under  stress  of  the  injury  inflicted  upon  the  tenant 
farmers  by  American  competition  and  by  the  exactions  of 
middlemen,  we  see  co-operation  triumphing,  so  that  there  arise 
numerous  co-operative  dairy  farms,  co-operatives  for  cattle- 
breeding,  co-operatives  for  the  purchase  of  raw  materials  and 
of  machinery,  and  agricultural  co-operative  credit  associations.' 

*  M^line,  Le  retour  d,  la  terre  e.t  la  surproduction  industrieUe,  Paris,  1906,  p.  88. 

*  Ozeroff  [Econotnic  Russia],  pp.  2.34-5. 

'  "  Jahrbiicher  N.  CE.,"  1906,  pp.  779,  et  seg.  ;  Recent  Growth  of  Co-opera- 
tion in  Ireland,  *'  Quarterly  Journal  of  Economics,"  1906,  pp.  547,  et  aeq. 
2  a 


354  '^^^  Economic  Synthesis 

At  the  same  time,  in  the  United  States,  societies  for  co-opera- 
tive production  are  being  instituted,  and  these  exclude  at 
least  the  initial  coercion,  even  if  they  maintain  the  sub- 
sequent coercion,  of  associated  labour  ;  recently,  moreover,  in 
the  State  of  Michigan,  certain  miners,  learning  that  the 
company  owning  the  mine  is  abandoning  a  part  of  its  work- 
ing, have  rented  this,  and  have  founded  a  pure  co-operative, 
the  Caledonia,  which  proves  successful.  Simultaneously,  in  the 
Great  RepubHc,  there  come  into  existence  all  kinds  of  free 
associations,  such  as  that  of  the  Colonial  Dames,  that  of  the 
Sons  of  American  Civilisation,  and  numerous  working-men's 
societies.^  Everywhere  free  groupings  and  voluntary  federa- 
tions arise  to  replace  passive  obedience.  These  free  groups 
may  already  be  counted  in  millions,  and  new  ones  are  formed 
daily.  They  embrace  science,  art,  industry,  commerce, 
mutual  aid,  and  even  the  defence  of  territory  and  insurance 
against  theft,  legal  proceedings,  divorce,  or  the  danger  of 
having  twins. ^  In  a  word,  all  the  forms  of  human  activity 
may  now  pursue  their  ends  by  means  of  voluntary  associations 
conducted  upon  an  ever  vaster  scale. ^  To-day,  it  is  true,  all 
such  phenomena  are  no  more  than  exceptional  and  sporadic ; 
but  they  possess  a  high  symptomatic  value,  as  heralds  of  a 
new  era,  or  as  precursors  of  that  spontaneous  association  of 
labour  which  will  be  the  fundamental  economic  institution  of 
the  coming  centuries. 

A  coercive  association  of  labour  which  tends  towards  free 
association  without  ever  being  able  to  attain  to  it — ^here  is  the 
synthesis,  herein  is  the  essence,  of  economic  evolution  in  the 
phases  hitherto  traversed.  But  just  as  the  decline  which  has 
up  till  now  manifested  itself  in  the  productivity  of  the  land  has 
brought  about  a  progressive  diminution  in  the  reluctance  to  the 
association  of  labour,  and  therefore  a  diminution  in  the 
coercion  necessary  to  impose  that  association ;  so  a  further 

*  Certain  European  writers  who  have  carefully  studied  the  social  life  of 
the  United  States,  such  as  Bryce  and  Ostrogorski,  deplore  the  growth  of  such 
associations,  regarding  them  as  imposing  harmful  restraint  upon  individual 
liberty  (Ostrogorski,  La  d^mocratie  et  V organisation  des  partis  politiques,  Paris, 
1902,  II,  p.  554).  But  these  writers  fail  to  point  out  that  the  restraints  with 
which  we  have  to  do  here  are  voluntarily  imposed  by  those  who  submit  to  them, 
in  order  to  obviate  asymmetry  of  production  or  of  social  life  in  common. 

*  Kropotkine,  Paroles  d'un  revolte,  Paris,  1885,  p.  212. 

*  Bailie,  Joaiah  Warren,  Boston,  1906,  xxviii-ix. 


Revohitions  of  Income  355 

decline  in  the  productivity  of  the  land,  by  rendering  the  product 
of  isolated  labour  inferior  to  the  subsistence  of  the  producer, 
will  at  length  altogether  annul  the  reluctance  to  the  association 
of  labour,  and  will  thus  open  the  way  for  the  institution  of  the 
spontaneous  association  of  labour. 

Summing  up  the  matter,  therefore,  in  broad  outline,  we  may 
conclude  that  human  labour  traverses  three  principal  stages. 
In  the  first  stage,  when  the  productivity  of  the  soil  is  exuberant 
and  when  isolated  labour  produces  an  excess  over  the  sub- 
sistence of  the  producer,  isolated  labour  prevails,  and  con- 
stitutes the  basis  of  the  prehistoric  age.  In  the  second  stage, 
when  the  fertility  of  the  soil  has  diminished,  and  when  isolated 
labour  produces  no  more  than  the  subsistence  of  the  labourer, 
coercively  associated  labour  prevails,  and  this  period  embraces 
the  whole  of  recorded  history,  throughout  which  there  occur  the 
distressing  and  unceasing  vicissitudes  of  an  unstable  equi- 
librium. In  the  third  stage,  finally,  when  the  productivity 
of  the  soil  has  yet  further  diminished,  and  when  isolated  labour 
produces  less  than  the  subsistence  of  the  labourer,  there  will 
arise  freely  associated  labour,  which  will  form  the  foundation 
of  a  state  of  final  equilibrium.'^ 

A  primary  characteristic  of  this  harmonious  economic  form 
is  the  partial  or  total  reconstitution  of  that  community  of 
origin  between  subsistence  and  income  which  has  been  cancelled 
during  the  period  of  coercively  associated  labour.  In  fact,  as 
soon  as  the  product  of  isolated  labour  is  inferior  to  the  sub- 
sistence of  the  labourer,  the  association  of  labour  produces 
not  merely  income,  but  in  addition  a  part  of  subsistence ;  that 
is  to  say,  a  term  comes  to  that  categorical  distinction  which  has 
prevailed  throughout  the  period  of  the  coercive  association  of 
labour,  in  virtue  of  which  subsistence  is  the  product  of  isolated 
labour  and  income  the  product  of  associated  labour.    If  we 

^  The  fantastic  assertion  of  Quetelet  {Du  systeme  social  et  des  lois  qui  le 
rdgisseM,  2,  s.I,  c.4),  that  the  average  Hfe  of  states  (or  of  social  phases)  is 
1461  years,  is  contradicted  by  the  obvious  fact  that  every  economic  period, 
like  every  geological  period,  is  of  less  duration  than  the  preceding.  On  a  very 
rough  calculation  it  may  be  said  that  the  communistic  economy  lasted  4000 
years,  the  slave  economy  2000  years,  and  the  feudal  economy  1000  years ; 
that  is  to  say,  that  the  diu*ation  of  each  social  form  is  one  half  the  duration  of 
the  preceding  form.  If  this  were  truly  the  case,  the  duration  of  the  wage 
economy  would  be  no  more  than  500  years,  and  thus  the  economic  order 
based  upon  the  coercive  association  of  labour  could  not  endiu-e  beyond  the 
twentieth  century. 


356  The  Econamic  Synthesis 

suppose  the  extreme  case  in  which  isolated  labour  is  incapable 
of  furnishing  any  product  at  all,  subsistence  and  income  are 
both,  in  their  entirety,  the  product  of  associated  labour, 
so  that  we  have  returned  to  that  primitive  state  of  affairs  in 
which  income  and  subsistence  are  derived  from  the  same 
source.  This  leads,  correlatively,  to  a  return  to  the  primitive 
rule  for  the  quantitative  determination  of  income.  For, 
whereas,  when  isolated  labour  produces  subsistence  alone,  the 
quantity  of  income  is  (in  normal  conditions)  equal  to  the 
specific  product  of  associated  labour  and  is  therefore  inde- 
pendent of  the  quantity  of  subsistence — when,  on  the  other 
hand,  subsistence  and  income  are  both  the  product,  it  may  be 
of  isolated,  it  may  be  of  associated  labour,  the  quantity  of 
income  is  equal  to  the  total  product  of  labour,  isolated  or 
associated  as  the  case  may  be,  less  subsistence,  and  thus  income 
becomes  a  function  of  the  quantity  of  subsistence. 

This,  however,  is  no  more  than  the  least  remarkable  among 
the  characteristics  of  the  latest  economic  phase.  For,  with  the 
formation  of  the  spontaneous  association  of  labour  there  at 
length  arises  an  economic  system  altogether  immune  from 
coercion,  and  for  this  very  reason  compatible  with  the  unre- 
stricted elasticity  of  the  productive  forces.  To  make  use  of  a 
simile  previously  employed,  the  economic  system  becomes,  in 
such  conditions,  a  perfectly  elastic  or  indefinitely  expansible 
receptacle,  within  which  the  productive  forces  can  develop 
freely  and  without  encountering  any  obstacle.  It  is,  therefore, 
no  longer  possible  for  the  increase  of  population  to  lead  to  the 
dissolution  of  the  prevaiHng  economic  form,  for  the  increasing 
development  of  the  productive  forces  which  results  from  the 
increasing  density  of  the  population  can  now  develop  in- 
definitely within  the  orbit  of  the  existing  economic  order.  ^ 
This  amounts  to  saying  that  there  is  now  at  length  attained  a 
perfectly  stable  and  indestructible  economic  form,  which  finally 
closes  the  cycle  of  social  transformations  or  of  economic  evolu- 
tion.— ^The  veiled  coercion,  which  adheres  to  the  association  of 
labour  in  all  the  forms  hitherto  traversed,  having  come  to  an 
end,  there  disappear  all  the  phenomena  which  derive  from 

1  Herbert  Spencer,  in  his  First  Principles,  writes  to  the  effect  that  a  society 
which  has  arrived  at  the  ultimate  stage  of  its  evolution  can  no  longer  be  modi- 
fied by  the  pressiire  of  population. 


Revolutions  of  Income  357 

that  coercion  ;  there  cease  the  disparity  between  value  and 
effective  labour,  the  existence  of  independent  incomes  of 
various  kinds,  and  the  primary  disparity  of  incomes  due  to 
the  ownership  of  elements  of  varying  productivity ;  there  no 
longer  exist  the  antagonism  between  product  and  in- 
come with  the  correlative  anti -technical  limitation  of  the 
product ;  there  is  no  longer  a  struggle  between  subsistence 
and  income,  no  longer  a  limitation  of  social  accumu- 
lation with  the  consequent  excess  of  population  over  capital ; 
there  is  no  longer,  in  fine,  a  struggle  between  incomes. — 
With  the  cessation  of  the  struggle  between  incomes,  the  superior 
incomes  can  no  longer  result  from  the  annexation  of  the  income 
of  others,  but  result  simply  and  solely  from  a  greater  produc- 
tion due  to  the  efficiency  of  superior  individual  abiHties  : 
upon  this  there  follows,  on  the  one  hand,  the  necessary 
exiguity  of  individual  incomes,  which  are  rigorously 
limited  by  the  efficiency  of  the  productive  abilities  of 
individuals ;  and  correlative^  there  follows  the  slight  degree 
of  disparity  between  incomes  (in  contradistinction  to  the 
great  disparity  between  individual  incomes  that  are  able  to 
increase  by  means  of  the  annexation  of  the  incomes  of  others) ; 
and  there  follows,  on  the  other  hand,  the  assignment  of  the 
greater  incomes  to  the  more  efficient  and  more  productive 
individuals  (in  contradistinction  to  the  assignment,  to  the  more 
dishonest  and  more  crafty,  of  incomes  increased  by  annexation 
of  income  from  others).  The  annexation  of  others*  income 
having  come  to  an  end,  there  no  longer  occurs  the  partial 
destruction  of  the  recipients  of  income  of  different  degrees, 
and  there  consequently  ceases  the  greater  reduction  in  the 
number  of  the  recipients  of  income  of  higher  degrees,  and 
therewith  ceases  the  very  process  that  gives  rise  to  the  pyramid 
of  the  recipients  of  income  ;  that  is  to  say,  the  pyramidal 
distribution  of  the  recipients  of  income  comes  to  an  end,  to  be 
replaced  by  their  distribution  in  accordance  with  a  binomial 
curve  analogous  to  that  representing  intellectual  aptitudes.  ^ 

^  The  intense  aspiration  for  equality  manifested  in  every  epoch  (and 
especially  fervent  in  children)  is  substantially  nothing  more  than  the  uncon- 
scious product  of  the  age-long  experience  of  the  race  in  societies  devastated 
by  the  struggle  between  incomes  ;  for,  in  such  societies,  since  the  economic 
superiority  of  one  individual  is  employed  to  others'  hurt,  everyone  is  instinc- 
tively led  on  grounds  of  self-preservation  to  resist  any  superiority  on  the 


3S8  The  Economic  Synthesis 

With  the  cessation  of  the  struggle  between  incomes  there 
disappears  the  chief  factor  of  a  moral  system  based  upon 
hatred  and  upon  war,  and  the  way  is  opened  for  the  spontaneous 
morahty  of  sympathy  and  of  love.  Finally,  with  the  cessation 
of  the  technical  coercion  to  the  association  of  labour  there 
cease  the  derived  and  superior  coercions,  that  is  to  say  the 
connective  institutions  of  coercive  morality,  law,  and  politics ; 
and  there  arises  for  the  first  time  a  morality,  a  law,  a  political 
order,  emanating  from  the  spontaneous  initiative  of  free 
associates.  The  regime  of  coercion,  of  inequality,  and  of  war, 
sinks  once  and  for  all  into  the  abysses  of  history,  and  from 
its  ruins  at  length  emerges  the  bright  and  enduring  regime 
of  liberty  and  peace. ^ 


part  of  others.  But  when  the  struggle  between  incomes  has  been  eliminated, 
when  one  individual's  superiority  in  income  can  no  longer  be  disadvantage- 
ous to  others,  the  prejudice  against  absolute  inequality  will  disappear ;  to  be 
replaced  by  the  more  rational  sentiment  of  proportional  justice,  or  by  the 
desire  that  there  should  exist  an  equal  proportion  between  remuneration  and 
effort. 

*  This  idea  that  human  evolution  resolves  itself  into  a  progressive  develop- 
ment from  the  coercive  association  to  the  free  association  of  labour,  finds 
more  or  less  explicit  expression  in  the  works  of  a  number  of  well-known 
writers.  Thus  Salvador  writes  {Jesus  Christ  et  sa  doctrine,  Paris,  1838,  p.  11)  : 
"  The  further  back  we  go  into  early  times,  the  more  do  we  find  that  the  force 
of  disaggregation  and  dispersion  prevails  over  the  force  of  association,  and 
the  more  therefore  is  it  necessary  that  the  means  employed  by  legislators 
and  the  chiefs  of  the  people  to  maintain  the  social  state  shall  be  energetic  in 
character.  The  more  fully,  on  the  other  hand,  the  nations  effect  the  occupa- 
tion of  the  globe,  the  more  does  the  force  of  association  increase  and  continue 
in  the  absence  of  any  external  aid." — The  last  assertion  is,  however,  erroneous, 
for  even  to-day  there  exists  no  example  of  an  association  of  labour  which  is 
sustained  in  the  absence  of  any  coercion  from  without. — "  No  important 
social  movement,"  writes  Baihe,  in  the  work  previously  quoted  (and  the 
admission  is  precious  since  it  is  made  by  an  anarchist),  "  has  yet  succeeded 
without  specific  and  often  arbitrary  organisation.  Mankind  in  its  present 
state  of  development  appears  imable  to  accomplish  much  without  leaders  " 
(p.  81).  "  The  fact  remains  that  a  new  social  movement,  if  it  is  to  impress 
itself  permanently  upon  the  thought  and  life  of  the  age,  must  have  active  and 
aggressive  leadership  "  {Ibid.).  Hence  the  coercive  association  of  labour  is 
not  a  phenomenon  peculiar  to  the  history  of  barbaric  times,  but  is  one  common 
to  the  whole  of  recorded  history. — Spencer,  in  tm*n  {Principles  of  Sociology, 
London,  1896,  III,  p.  483),  affirms  that  the  coercive  association  of  labour 
is  the  productive  form  adapted  to  a  military  society,  whereas  for  an 
industrial  society  the  spontaneous  association  of  labour  is  possible  and 
preferable.  This  would  be  true  only  if  by  the  terra  "industrial  society" 
we  should  understand  the  final  economy  wliich  has  not  as  yet  come 
into  existence. — The  thesis  with  which  we  are  here  concerned  has  been  the 
object  of  a  detailed  investigation  on  the  part  of  Metchnikoff  {La  civilisation 
et  lea  grands  fleuves  historiques,  Paris,  1889),  who  shows  extremely  well  how 
the  criterion  of  progress  is  manifested  by  the  increase  in  the  freedom  of 
associated  laboui*,  or  in  the  diminishing  degree  of  the  coercion  requisite  to 


Revolutions  of  Income  359 


effect  this  association.  Unfortunately  he  falls  into  the  common  error  accord- 
ing to  which  human  evolution  is  supposed  to  have  already  entered  the  superior 
and  stable  stage  of  the  spontaneous  association  of  labour  (Zoc.  cif.,  p.  52). 
Durkheim  makes  the  same  mistake.  He  properly  distinguishes  the  free  from 
the  coercive  division  (or  association)  of  labour  ;  but  he  believes  that  coercive 
association  continues  only  so  long  eis  a  central  authority  imposes  upon  each 
individual  the  labour  which  he  has  to  perform,  and  that  with  the  disappear- 
ance of  this  collective  rule  the  spontaneous  association  of  labour  begins.  But 
the  author  is  not  slow  to  recognise  that  such  is  not  really  the  case,  for  he  says  : 
"  We  do  not  have  the  spontaneous  division  of  labour  unless  society  is  con- 
stituted in  such  a  way  that  social  inequalities  are  precisely  correspondent 
with  natural  inequalities  "  {De  la  division  du  travail  social,  Paris,  1893,  p.  370). 
Now  since  in  human  societies,  past  and  present,  this  correspondence  (as  the 
author  himself  recognises)  does  not  exist,  this  amounts  to  saying  that  the 
spontaneous  division  of  labour  has  in  reality  never  yet  been  effected.  In  fact, 
he  himself  adds  :  "  It  is  true  that  this  perfect  spontaneity  is  not  yet  any- 
where to  be  found  "  (p.  371)  ;  and  again,  "  where  there  exist  rich  and  poor 
we  have  always  unjust  bargains  "  (p.  378) — and,  let  us  point  out,  we  have 
always  individuals  who  are  constrained  to  labour  at  the  will  and  for  the 
profit  of  others.  Therefore,  in  such  conditions,  which  axe  those  of  differ- 
entiated income  throughout  recorded  history,  the  association  is  not  free,  but 
coercive. 

The  free  association  of  labour  therefore  possesses  a  value  which  is  not 
immanent  and  present,  but  solely  evolutional  and  one  of  tendency.  Durk- 
heim himself,  in  the  end,  asserts  this  in  the  plainest  terms,  writing  {loc.  ciL, 
p.  374)  :  "  It  is  a  vital  condition  of  organised  societies  that  the  division  of 
labour  should  approximate  always  more  closely  towards  the  spontaneous 
form.  Assuredly,  therefore,  the  tendency  is  towards  this  condition  ;  and 
the  advances  hitherto  effected  give  us  no  more  than  a  faint  idea  of  those 
which  are  yet  to  come."  Another  French  sociologist,  Lacombe,  puts  the 
matter  even  more  plainly,  as  follows  {De  Vhistoire  consideree  comme  science, 
Paris,  1894,  pp.  405-6)  :  "  The  final  catastrophe  towards  which  our  society 
is  tending  can  perhaps  be  avoided  only  by  means  of  a  new  force,  association, 
by  voluntary  and  free  groupings.  It  is  necessary  that  the  idea  of  the  general 
interest  of  the  species  shall  create  its  own  organism,  which  can  be  none  other 
than  a  free  society,  devoid  of  official  character,  founded  by  a  few,  enlarged 
by  the  voluntary  influx  of  free  and  equal  persons  dividing  and  subdividing 
themselves  without  breaking  into  fragments. — It  is  impossible  to  prefigure 
its  precise  structure.  Its  foundation  must  be  personal  responsibility  con- 
joined to  a  soUdarity  more  vast  than  the  antique  solidarity  of  the  clan,  and 
more  enlightened  than  Christian  or  Mohammedan  charity." — The  tendency 
to  the  formation  and  generalisation  of  free  association,  recognised  many  years 
ago  by  Mazzini  and  by  Proudhon,  sustained  by  De  Molinari  {L' evolution  politiqtce 
et  la  revolution,  Paris,  1884,  p.  482) ;  Hartmann  {Philosophic  des  Unbewiosstens, 
Berlin,  1869,  p.  296)  ;  and  Marshall  {loc.  cit.,  pp.  51,  et  seq.) — is  to-day  vigor- 
ously defended  by  Fourniere  {Uindividu,  V association  et  Vetat,  Paris,  1907, 
pp.  249,  et  seq.). — To  this  tendency,  in  the  region  of  actual  experience,  there 
corresponds  an  analogous  tendency  in  the  field  of  thought,  inasmuch  as  the 
idea  of  free  individual  initiative  tends  more  and  more  to  replace  that  of  a 
mechanical,  objective,  and  necessary  determination.  This  tendency  displays 
itself,  in  biology  with  De  Vries  and  Quinton,  in  psychology  with  James  and 
Bergson,  in  economics  with  Marshall,  in  reformist  socialism  with  Bernstein 
and  Goldscheid,  and  finally  (notwithstanding  the  radically  opposite  ten- 
dencies) in  the  theorists  of  syndicaUsm. 

If  these  considerations  are  sound,  we  plainly  see  the  error  of  the  thesis 
according  to  which  communism  is  supposed  to  have  originated  spontaneously 
with  the  first  appearance  of  mankind  in  the  world  (cf.,  for  example,  Elie 
Reclus,  Les  primitifs,  Paris,  1903,  pp.  68,  et  seq.),  or,  more  generally,  the  falsity 
of  the  idea  that  association  was  the  primary  and  spontaneous  form  of  human 


360  The  Economic  Synthesis 

existence.  This  is  so  far  from  being  the  truth,  that  aasociation  has  always 
been  coercive  ;  and  the  coercion  which  controls  association  attains  the  maxi- 
mum intensity  at  the  outset  of  human  social  life.  No  less  serious  is  the  error 
of  Breysig  {Kulturgesdiichte  der  Neuzeit,  Berlin,  1901,  II,  pp.  2,  et  seq.),  when 
he  affirms  that  the  essential  motive  force  of  history  is  the  impulse  to  associa- 
tion, which  gradually  gives  rise  to  the  ascendent  forms  of  social  aggregation. 
In  actual  fact,  this  assumed  "  impulse  to  association  "  is  not  to  be  encoun- 
tered in  any  known  phase  of  history,  for  there  is  always  manifest  throughout 
all  times  the  opposite  phenomenon  of  an  overwhelming  aversion  to  association. 
The  progressive  forms  of  social  aggregation  represent  the  series  of  methods 
and  of  institutions  successively  employed  to  impose  upon  labour  that  associa- 
tion which  cannot  be  spontaneously  effected. 


CONCLUSION 

THE  ESSENTIAL  ECONOMIC  LAW 

Thus  history  presents  a  succession  of  economic  systems  which 
evolve  throughout  a  more  or  less  considerable  period,  and 
finall}^  succumb  owing  to  an  inevitable  process  of  internal 
decomposition.  Now  the  common  element  in  all  these  successive 
economic  orders  must  of  necessity  relate  to  a  series  of  pheno- 
mena universal  and  constant  in  character  ;  and  since  it  con- 
stitutes the  common  substance  of  a  series  of  forms  whose  equili- 
briuni  is  essentially  unstable,  it  must  contain  within  itself  a 
factor  of  immanent  instabihty.  Now  the  process  that  is 
common  to  all  the  successive  economic  forms  is  the  association 
of  labour,  a  constant  and  invariable  phenomenon  in  all  ages  ; 
whilst  the  factor  of  immanent  instability  of  all  the  changing 
social  forms  is  the  coercion  that  disciplines  the  association  of 
labour.  The  association  of  labour  constitutes  the  basis  of 
income  in  every  successive  form  ;  whilst  the  coercion  which 
disciplines  that  association  constitutes  the  basis  and  is  the 
essential  factor  of  the  antagonism  and  of  the  instability  with 
which  every  form  of  income  is  permeated. 

The  foundation  of  all  the  economic  forms  which  have 
hitherto  existed,  that  which  constitutes  their  essence  and  their 
base,  is,  then,  the  coercion  to  the  association  of  labour,  which 
manifests  itself,  in  the  case  of  undifferentiated  income,  through 
the  instrumentality  of  the  collective  labourer,  and  in  the  case 
of  differentiated  income,  through  the  instrumentality  of  the 
individual  non-labourer.  The  coercion  to  the  association  of 
labour  is  the  undifferentiated  matrix  of  the  economic  order  in 
all  the  concrete  manifestations  which  have  hitherto  prevailed  ; 
it  is  from  this  coercion  that  arise  the  asj^mme tries  and  the 
contrasts  which  undermine  the  economic  order,  and  ultimately 
lead  to  its  disintegration.  If,  then,  the  criticism  of  differenti- 
ated income  may  be  made  in  the  name  of  equality,  the  criticism 
of  income  as  it  has  hitherto  prevailed — ^independently  of  its 

aei 


362  The  Economic  Synthesis 

form — ^must  be  made  in  the  name  of  liberty  ;  for  it  is  upon  the 
negation  of  liberty,  that  is  to  say  upon  coercion,  that  depends 
the  origin  of  the  essential  structure  of  income  as  it  has  hitherto 
prevailed  and  the  complex  of  antagonisms  of  which  it  is 
composed.  The  essential  basis  of  social  antagonism  is,  there- 
fore, not  to  be  found  in  the  relationships  of  distribution,  or  in 
the  more  or  less  differentiated  forms  which  these  relationships 
assume  in  the  capitalist  economy  or  in  differentiated  income  ; 
for  the  capitalist  economy,  differentiated  income,  the  coercion 
to  the  association  of  labour  exercised  by  the  individual  non- 
labourer,  are  in  their  turn  episodes,  or  specific  manifestations 
of  a  more  general  and  remoter  cause  which  is  comprised  within 
the  organic  process  of  production — ^this  cause  being  the  coercive 
association  of  labour.  For  this  reason,  the  analysis  or  the 
criticism  of  capitalist  property  is  altogether  unable  to  conduct 
us  to  the  root  of  the  matter,  or  to  exhaust  the  entire  field  of 
investigation  ;  for  beyond  the  frontiers  of  this  analysis  there 
extends  a  much  profounder  investigation  and  a  much  more 
general  and  measureless  problem. — Just  as  beyond  the  problem 
of  the  origin  of  matter  we  have  the  most  profound  problem  of 
the  origin  of  geometrical  forms  in  immaterial  space  :  so  beyond 
the  problem  of  the  nature  and  laws  of  capitahst  property  we 
have  the  more  general  and  profounder  problem  of  the  un- 
differentiated matrix  of  all  the  economic  forms,  capitalist 
or  non-capitalist,  that  have  hitherto  existed ;  that  is  to  say, 
of  the  ineradicable  coercion  to  the  association  of  labour  which 
is  the  essential  foundation  of  economic  antagonism.  It 
follows  from  this  that  the  forces  aiming  to  bring  such  an- 
tagonism to  an  end  cannot  attain  their  purpose  simply  by  the 
destruction  of  the  capitalist  system ;  for  if  this  system  were 
replaced  by  some  other  form  of  the  coercive  association  of 
labour,  it  may  be  even  on  the  base  of  undifferentiated  income 
(as  would  be  the  communistic  economy),  the  economic  con- 
trasts arising  out  of  the  coercive  association  of  labour  would 
persist,  and  it  would  therefore  be  impossible  for  the  social 
order  to  attain  to  a  permanent  stability  and  the  population 
to  a  condition  of  permanent  well-being.  The  essential  social 
contradiction  can  be  eliminated,  economic  equilibrium  can  be 
established,  only  by  means  of  a  profound  transformation, 
affecting  not  merely  the  process  of  distribution,  but  also  the 


The  Essential  Economic  Law  363 

process  of  production,  relieving  this  latter  process  from  the 
coercion  which  has  hitherto  environed  it  and  restricted  its 
efficiency  ;  in  other  words,  by  the  destruction  of  the  coercive 
association  of  labour  and  its  replacement  by  the  free  associa- 
tion of  labour.  Herein  is  to  be  found  the  supreme  objective 
towards  which  must  converge  all  the  forces  of  social  renova- 
tion.^ 

*  This  is  now  understood  by  all  the  most  enlightened  economists-,  not 
excepting  the  socialists,  who  point  out  that  a  reform  which  effects  no  more 
than  the  distribution  of  income  among  the  proletarians,  while  leaving  un- 
affected the  method  by  which  that  income  is  actually  produced,  would  have 
no  more  than  an  extremely  restricted  and  fugitive  effect ;  and  that  a  decisive 
and  durable  social  renovation  must  be  initiated  by  a  radical  metamorphosis 
in  the  process  of  production. 


INDEX  OF  AUTHORS 


Acworth,  201 

Adam  Smith.     See  Smith 

Aftalion,  268 

Anton,  47 

Antoninus.     See  Aurelius 

Arias,  279 

Aristotle,  214,  255,  288 

Ashley,  291 

Aurelius,  215 

Avenel.     See  D'Avenel 

Baden- Powell,  84 

Bagehot,  259 

Bailey,  70 

Bailie,  354,  358 

Baker,  71,  276,  287,  293 

Baranowski.     See  Tugan-Baranowski 

Barnett,  189 

Bastian,  129 

Baudeau,  232 

Baxter,  Dudley,  67 

Beatrice  Webb.     See  Webb 

Beauchet,  85,  87 

Beaulieu.     See  Leroy-Beaulieu 

Beaumanoir,  89 

Bela  Foldes.     See  Foldes 

Benini,  221,  327 

Bergson,  .359 

Bernhardi,  71 

Bernstein,  4.  189,  327,  359 

Biermer,  161 

Blanqui,  139 

Blumner,  190 

Bonar,  24 

Bonger,  298 

Bonn,  116 

Bonnem^re,  256 

Booth,  19 

Bourguin,  91,  197,  271,  279 

Bourne,  149 

Bourouill,  De.     See  De  Bourouill 

Brentano,  52 

Bresciani,  156,  327 

Breysig,  360 

Bryce,  85,  354 

Biicher,  48,  79,  88,  132,  191,  261 

Bulgakoff,  348 

Cabiati,  236 
Caesar,  10 
Cairnes,  190 
Calmet,  103 


Calwer,  276,  299 

Cannan,  33,  38 

Carver,  66,  227 

Cassel,  229 

Cassola,  273,  274 

Castellazzo,  162 

Catellani,  143 

Cayley,  223 

Chaptal,  241 

Chatelain,  250 

Cherbuliez,  34,  352 

Chessa,  292 

Chevalier,  85 

Child,  227 

Chiozza-Money,  232,  298,  317 

Cibrario,  261 

Cicero,  47 

Clark,  34,  227 

Cobbett,  263 

Cochut,  56 

Cohn,  292 

Collins,  97 

Comte,  2 

Conant,  73 

Constantine,  260 

Cooper,  121 

Cornehssen,  276 

Cossa,  41 

Cunynghame,  265 

Cyprian.     See  St.  Cyprian 

Dadabhay  Naoroji.     See  Naoroji 

Dareraberg,  275 

Davenant,  232 

D'Avenel,  102,  104 

Davenport,  66 

David,  189,  348 

De  Bourouill,  33,  55,  66 

Defourni,  2 

De  Girard,  89 

De  Greef,  4 

De  Lavergne,  295 

Delisle,  101 

De  Molinari,  359 

Des  Marets,  101 

Devine,  352 

De  Viti,  263 

De  Vries,  359 

Di  Castellazzo.     See  Castellazzo 

Diehl,  3 


Digby,  268 
Dilke.  175 


365 


366 


Index  ofA74thors 


Dom  Calmet.     See  Calmet 
Doren,  191 

Dubois-Reyraond,  128,  320 
Dudley  Baxter.     See  Baxter 
Dumont,  236 
Durkheim,  359 

East  India  Merchant,  An,  73 
Ecclesiasticus.     See  Jesus  of  Sirach 
Edgeworth,  227 
Effertz,  4,  5,  31,  211 
Eli  Reclus.     See  Reclus 
Ely,  176,  275 
Engels,  3 
Evans,  259 

Fabian  Society,  156 

Fahlbeck,  121,  335 

Fechner,  288 

Felix,  232 

Fellner,  67 

Fenicia,  89 

Ferrara,  38,  41,  141,  963,  349 

Ferrero,  26 

Fetter,  66 

Feuerherd,  97,  190 

Fisher,  33,  40,  51,  €^Q,  141,  166,  241 

Flora,  201 

Foldes,  Bela,  67 

Fontana,  3 

Fontana-Russo,  270 

Forbonnais,  83 

Forscheimer,  16 

Fourniere,  359 

Fuisting,  161 

Fukuda,  85 

Galiani,  279 

Galton,  129,  146 

Ganilh,  139 

Gartner,  42 

Gegenbaur,  2 

Gide,  327 

Giglioli,  348 

Gioh,  85,  87 

Girard.     See  De  Girard 

Gneist,  47 

Goldscheid,  359 

Goldschmidt,  261 

Gomberg,  44,  49 

Gonner,  227 

Goschen,  327 

Graziani,  263 

Greef.     See  De  Greef 

Grimm,  103 

Groag,  82 

Guiraud,  216 

Gunton,  71 

Haggard,  279,  349 
Hahn,  8,  190,  349 


Halle.     See  Von  Halle 

Halperine,  253 

Harris,  246 

Hartmann,  359 

Heine,  60 

Henry,  221 

Herbert,  84 

Herbert  Spencer.     See  Spencer 

Hermann,  40,  63,  66,  279 

Hertzka,  71 

Higgs,  156 

Hilgard,  85 

Hobson,  71,  188 

Hollander,  189 

Hugo,  215 

Humboldt,  8 

Huschke,  241 

Ilejin,  72 
Inama,  103 

Inama-Sternegg,  24,  47,  256 
Issajeff,  71 

Jager,  66 
JameS;,  359 
JanschuU,  201 
Jansen,  185 
Jason,  248,  250 
Jaur^s,  103 
Jenks,  345 
Jensen,  348 
Jesus  of  Sirach,  282 
Julianus,  36 
Jung,  43 

Kalinoff,  66 

Karitchew,  185 

Karl  Marx.     See  Marx 

Karl  Pearson.     See  Pearson 

Kerejew,  139 

Kinsman,  166 

Kleinwachter,  66 

Kohler,  118 

Kovalewski,  103 

Kropotkine,  3.54 

Lacombe,  359 

Lake,  246 

Lamprecht,  101,  102,  103,  256,  2£ 

Landau,  87 

Landry,  211 

Langethal,  103 

Latimer,  349 

Lattes,  262 

Launhardt,  201 

Laur,  348 

Lavergne.     See  de  Lavergne 

Lawson,  345 

Lecouteux,  48 

Leicht,  101 

Leiter,  150 


Index  of  Authors 


367 


Leraonnier,  97 

Leroy-Beaulieu,  19,  114,  142 

Lescure,  132,  217 

Levasseur,  263 

Levy,  149 

Lewins,  W.,  233 

Lexis,  67,  142 

LibeUi,  174 

Lieftnann,  66 

Limentani,  2 

Linguet,  19 

List,  269 

Liverpool,  263 

Lloyd,  274 

Long,  James,  189 

Lorenzoni,  313,  352 

Loria,  6,  16,  19,  92,  101,  103,  120,  123, 

198,  211,  225,  241,  258,  262,  290,  321, 

340 
Lotz,  170 


Macrosty,  276,  293 

Maitland,  85 

Malchus,  170 

Malthus,  29 

Mandeville,  24 

Mantoux,  23,  123,  191,  259 

Marcus  Aurelius.     See  Aurelius 

Marets.     See  des  Marets 

Marshall,  33,  ^Q,  227,  359 

Marsilj  Libelli.     See  LibeUi 

Marx,  3,  4,  5,  23,  29,  31,  34,  %%,  67,  68, 

79,  85,  113,  114,  236,  243,  257,  313, 

340 
Maurel,  334 
Maurer,  87,  90,  91,  103 
May,  296 
Mayer,  40 
Mazzini,  359 
Meline,  353 
MetchnikofF,  85,  358 
Meyer,  66,  69 
Michelet,  237 
Michels,  318 

Michlachewski,  29,  67,  195,  284 
Mill,  2,  3,  29,  113,  139,  140 
MithofF,  33 
Mitscherlich,  155 
Molinari,  De.     See  De  Molinari 
Mombert,  156,  237 
Mommsen,  85,  191 
Mondolfo,  103 

Money.     See  Chiozza-Money 
Montanari,  279 
Montesquieu,  27,  262 
Moore,  221 
Morrison,  233 
Moser,  192 
Mossmann,  232 
Much,  126 


Naoroji,  268 
Nazzani,  67 
Neymarck,  327 
Nieboer,  19,  103 
Nitzch,  103,  256 
Nowitzki,  101,  103 

Oifermann,  114 
Oliver,  47,  97 
Ono,  26 

Oppenheiraer,  267,  275 
Ortes,  110 
OrtlofF,  169 
Ostrogorski,  354 
Oswalt,  197,  201 
OzerofF,  159,  175,  269,  353 

Page,     See  Walker- Page 

Page,  104 

Paisant,  280 

Palmieri,  102 

Pantaleoni,  50,  66,  114 

Pareto,  208,  332 

Patten,  2 

Payne,  82 

Pearson,  Karl,  19 

Pernice,  260 

Petrazycki,  33,  36,  261 

Petrucci,  191 

Petty,  191 

Peyser,  118 

Philippovich,  153,  295 

Philipps,  97,  98,  101,  190 

Pierson,  67 

Pigou,  217 

Plautus,  47 

Pliny,  47 

Pohle,  156 

Pohlmann,  103 

Polybius,  214 

Potthof,  150 

Powell.     See  Baden-Powell 

Prescott,  84 

Price,  223 

Proudhon,  38 

Quetelet,  355 
Quinton,  359 

Rabelais,  256 

Ramsay,  134 

Ranke,  47 

Ratzel,  19 

Ratzenhofer,  86 

Ravenstone,  128 

Reclus,  Eli,  236,  359 

Revillout,  118,  283 

Reymond.     See  Dubois-Reymond 

Ricardo,  31,  38,  62,  116,  132,  140.  163, 

194,  236 
Riekes,  22 


T 


368 


Index  of  Authors 


Rodbertus,  5,  71,  101 

Rogers,  217 

Roscher,  33,  66,  67,  139 

Rousseau,  24- 

Russell,  583,  345 

Russo.    See  Fontana-Russo 

SagUo,  275 

St.  Cyprian,  349 

Salvador,  358 

Salvianus,  291 

Sartorius    von    Waltershausen,      See 

Von  Waltershausen 
Savigny,  101 
Sax,  67,  201 
Say,  38,  194 
Sayce,  118 
Schanz,  42 
SchUler,  271 
Schleiden,  2 
Schmoller,  37,  40,  iS%,  189,  278.   285, 

299,  327 
Schopenhauer,  215 
Schuhraacher,  299 
Schurtz,  129 
Schwann,  2 
Seager,  69 
Seebohm,  87 
Seek,  101 
Segre,  101 

Seligraan,  23,  41,  66,  156 
Serpieri,  49 
Shadwell,  349 
Sidney  Webb.     See  Webb 
Sieber,  84,  85 
Simrael,  305 
Sinzheiraer,  378 
Sirach.     See  Jesus  of  Sirach 
Sismondi,  70,  194,  234 
Smart,  Q% 
Smith,  Adam,  24,  31,  37,  38,  62,  73, 

73,  74,  139,  192,  194,  233,  275 
Smith,  The  Rev.  Joseph,  233 
Snider,  164 
Soetbeer,  66 
Sombart,  22,  -23,  b'i,  231 
Spahr,  179 

Spencer,  2,  19,  114,  356,  358 
Stammier,  3 
Steuart,  29,  49 
Stolzmann,  137 
Storch,  33,  66 
Stuart  MiU.    See  Mill 
Supino,  71 
Syme,  268,  274 


Tarbell,  Ida,  260,  382 
Tarde,  264,  285 
Thaer,  45,  47,  50 
Thomin,  320 
Thompson,  349 
Thorold  Rogers.     See  Rogers 
Thunen,  44,  48 

Toesca  di  Castellazzo.    See  Castellazzo 
Tooke,  69,  73,  74,  259 
Totomianz,  352 

Tugan-Baranowski,  48,  68,  104,  121, 
320 

Uhrich,  201 

Valenti,  66 

Vanderkindere,  83,  232 

Vandervelde,  252,  348 

Varrow,  139 

Veblen,  257,  359,  274 

Vico,  349 

Victor  Hugo.     See  Hugo 

Vinogradoflf,  36,  102,  104,  189 

Virgil,  139 

Viti.     See  De  Viti 

Vocke,  168 

Voltaire,  102 

Von  Halle,  48 

Von  Waltershausen,  155 

Vries.     See  De  Vries 

Wagner,  67,  250 
Wakefield,  85 
Wakefield,  PrisciUa,  233 
Walker-Page,  217 
Walras,  134 

Waltershausen.     See    Von    Walters- 
hausen 
Waltz,  45,  49 
Waltzing,  82 
Warschauer,  233 
Webb,  306,  227,  373,  275 
Wells,  H.  G.,377 
Wergeland,  101,  103 
Wernicker,  295 
Westermarck,  356 
Wiesmiiller,  255 
Wildman,  257 
WiUett,  41 
Wolf,  327 
Woronzoff,  71,  73 

Xenophon,  47,  190,  191 

Youngman,  Anna,  345 


WILLIAM    BRENDON   AND   SON,    LTD.   PRINTERS,    PLYMOUTH 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 
BERKELEY 

Return  to  desk  from  which  borrowed. 
This  book  is  DUE  on  the  last  date  stamped  below. 


NOV  24  1947 


Zf^' 


64t^ 


m 


REC'D  UP 

APR    V64-!: 
MAY  13 


JAN  I  7  2001  > 


LD  21-100m-9,'47(A5702sl6)476 


\0t 
1/'/ 


